An antinomy in the theory of comparative advantage

John Z. Drabicki, Akira Takayama

Research output: Contribution to journalArticle

16 Scopus citations

Abstract

This paper shows that the usual bilateral rule of comparing relative prices under autarky to determine the pattern of trade is not valid for the multicommodity world. In addition, equilibrium world price ratios need not fall between the corresponding price ranges under autarky. Such a paradox disappears under gross substitutability when the third commodity is a nontradeable. For the case of tradeables, an alternative bilateral rule to determine the pattern of trade is proposed. Since the classical constant cost case has been heavily discussed in the literature, we confine ourselves to the neoclassical case.

Original languageEnglish (US)
Pages (from-to)211-223
Number of pages13
JournalJournal of International Economics
Volume9
Issue number2
DOIs
StatePublished - May 1979

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics

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