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    1) The Ricardian and Heckscher-Ohlin trade models analyze how differences in labor productivity and factor endowments between countries lead to comparative advantages and gains from trade. 2) Labor productivity and the relative abundance of capital and labor determine a country's comparative advantage. Countries will specialize and trade based on these differences. 3) Trade allows for redistribution of income between countries and industries based on their comparative advantages, even if absolute costs of production differ.

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    1) The Ricardian and Heckscher-Ohlin trade models analyze how differences in labor productivity and factor endowments between countries lead to comparative advantages and gains from trade. 2) Labor productivity and the relative abundance of capital and labor determine a country's comparative advantage. Countries will specialize and trade based on these differences. 3) Trade allows for redistribution of income between countries and industries based on their comparative advantages, even if absolute costs of production differ.

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    © All Rights Reserved
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    5 views1 page

    CFA Reading Notes

    Uploaded by

    hwykvycjs8
    1) The Ricardian and Heckscher-Ohlin trade models analyze how differences in labor productivity and factor endowments between countries lead to comparative advantages and gains from trade. 2) Labor productivity and the relative abundance of capital and labor determine a country's comparative advantage. Countries will specialize and trade based on these differences. 3) Trade allows for redistribution of income between countries and industries based on their comparative advantages, even if absolute costs of production differ.

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    © All Rights Reserved
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    of 1

    Ricardian trade model Heckscher-Cklin Grade model

    Labor is
    only factor Labor the
    ·

    factors
    ·

    capital
    and are

    Differences in labor E tech Scarcity abundanc determine adv


    ·

    prod .
    and
    comp . .

    Possible
    ·

    to trade
    comparative advantage ,
    not absolute redistribution
    of income
    Is
    function of app . costs (2 -> K) through trade

    Each is the same in each


    county
    Deadweight less
    from twil but varies
    by indesty .

    Pitt
    ne

    "Picid , P

    B + D :
    deadweight loss

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