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Linking Absolute and Comparative Advantage to Intra-Industry Trade Theory

Weder, Rolf. (1995) Linking Absolute and Comparative Advantage to Intra-Industry Trade Theory. Review of International Economics, 3 (3). pp. 342-354.

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Official URL: http://edoc.unibas.ch/43003/

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Abstract

Two countries, which differ with respect to domestic demand for two groups of differentiated products, are considered in a setting of monopolistic competition where international trade is subject to transaction costs. It is shown that relative differences in demand determine the trade pattern. Each country is a net exporter of that group for which domestic demand is relatively larger-where the country has a comparative home-market advantage. Absolute differences in demand determine relative wages. Thus, the paper argues that the notions of absolute and comparative advantage as found in traditional trade theory also have meaning in new trade theory.
Faculties and Departments:06 Faculty of Business and Economics > Departement Wirtschaftswissenschaften > Professuren Wirtschaftswissenschaften > Aussenwirtschaft und Europ. Integration (Weder)
08 Cross-disciplinary Subjects > Europainstitut > Europainstitut > Europäische Wirtschaft (Weder)
UniBasel Contributors:Weder, Rolf
Item Type:Article, refereed
Publisher:Wiley
ISBN:
e-ISBN:
ISSN: 0965-7576
e-ISSN: 1467-9396
Note:Publication type according to Uni Basel Research Database: Journal article
Identification Number:
Last Modified:26 Oct 2016 11:11
Deposited On:26 Oct 2016 11:11

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