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The General Validity of the Law of Comparative Advantage
Alan V. Deardorff
Journal of Political Economy
Vol. 88, No. 5 (Oct., 1980), pp. 941-957
Published by: The University of Chicago Press
Stable URL: http://www.jstor.org/stable/1833142
Page Count: 17
You can always find the topics here!Topics: Comparative advantage, Prices, Free trade, International trade, Distributive trade, Trade, World prices, Trade legislation, Tariffs, Political economy
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It is well known that the law of comparative advantage breaks down when applied to individual commodities or pairs of commodities in a many-commodity world. This paper shows that the law is nonetheless valid if restated in terms of averages across all commodities. Specifically, a theorem and several corollaries are derived which establish correlations between vectors of trade and vectors containing relative-autarky-price measures of comparative advantage. These results are proven in a general many-commodity model that allows for tariffs, transport costs, and other impediments to trade.
Journal of Political Economy © 1980 The University of Chicago Press