Comparative advantage
Comparative advantage: the theory first proposed by David Ricardo in 1817 that a country is more likely to export goods that it can produce relatively efficiently. The relative efficiency measure compares production costs of different goods in each country concerned, not the production cost of the same good in different countries. A country’s comparative advantage is reflected in its unsubsidized exports to world markets which is then said to be a country’s revealed comparative advantage. Comparative advantage is seldom static. Countries can acquire a comparative advantage through, for example, investing in the acquisition of skills by their workforces. Hence the concept of dynamic comparative advantage. See also absolute advantage, competitive advantage, gains-from-trade theory, Heckscher-Ohlin theorem, kaleidoscopic comparative advantage and Stolper-Samuelson theorem.
Source: http://ctrc.sice.oas.org/trc/WTO/Documents/Dictionary%20of%20trade%20%20policy%20terms.pdf
Web site to visit: http://ctrc.sice.oas.org
Author of the text: W. Goode
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