How comparative advantage applies in a world of fragmented production and intra-industry trade (e-book) (used book) | bookbook.eu

Description

Essay from the year 2012 in the subject Business economics - Trade and Distribution, London School of Economics, language: English, abstract: The concept of comparative advantages is a key idea of international trade theories such as the Ricardian Model and the Heckscher-Ohlin Model. The Ricardian Model was developed by the British economist David Ricardo in the 19th century whereas the Heckscher-Ohlin (H-O) Model was proposed by two Swedish economists in the 1970s. However, new international trade patterns, such as intra-industry trade and world fragmented production, have now emerged. Therefore, it is worth investigating whether the concept of comparative advantages is still a useful tool to understand and describe current international trade. This essay will first analyze the two models based on comparative advantages giving two real examples. Second, fragmented production and intra-industry trade will be considered. Using real cases, it will be demonstrated that comparative advantages apply to both these two types of trade, although mainly in the case of fragmented production.