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05 The Ricardian Model, Part 3

05 The Ricardian Model, Part 3 - The Ricardian Model Part 3...

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1 1 The Ricardian Model, Part 3 • Agenda – Misconceptions about Comparative Advantage – Comparative Advantage with Many Goods – Transportation Costs and Non-Traded Goods – Empirical Evidence 2 Misconceptions The Productivity/Competitiveness Argument – Free trade is beneficial only if a country is more productive than foreign countries. 3 Misconceptions The Productivity / Competitiveness Argument – The benefits of free trade do not depend on absolute advantage . – The benefits of free trade depend on comparative advantage . 4 Misconceptions The Pauper Labor Augment – Free trade with countries that base competition on low wages is unfair and hurts other countries that pay high wages.
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