Beyond Ricardian Model: An Optimal Commodity Distribution Based on Absolute Advantage for Multi-Country Multi-Commodity

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Provided by: Canadian Center of Science and Education
Topic: SMBs
Format: PDF
Ricardo's comparative advantage model asserts that international trade will make every single participant country better off if they traded goods in which they have comparative advantage. Tian (2008) has generalized and expanded this Ricardo's 2-country, 2-commodity comparative advantage into a multi-country, multi-commodity model. His methodology, however, occasionally fails to achieve optimal commodity distribution or to facilitate international trade even if it succeeds in optimal distribution, for it results in a high degree of difference in countries' commodity prices. This paper proposes an algorithm that selects countries' comparatively advantageous goods for multi-country, multi-commodity model based on their absolute advantage.
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