Premium
Comparative Advantage With and Without Gains from Trade
Author(s) -
Maneschi Andrea
Publication year - 1998
Publication title -
review of international economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.513
H-Index - 58
eISSN - 1467-9396
pISSN - 0965-7576
DOI - 10.1111/1467-9396.00091
Subject(s) - autarky , economics , comparative advantage , index (typography) , value (mathematics) , gains from trade , free trade , econometrics , microeconomics , international economics , international trade , mathematics , statistics , market economy , computer science , world wide web , welfare
In 1980, Deardorff, and Dixit and Norman, generalized the law of comparative advantage to show that the value of net imports at autarky prices (or “DDN index”) is nonnegative, so that net imports are correlated with autarky prices. The DDN index can be decomposed into the sum of (i) the equivalent variation of gains from trade, and (ii) the difference in GNP at autarky prices between autarky and trade. Several examples are given of classical and neoclassical economies where (i) or (ii) can be zero. Hence gains from trade are sufficient but not necessary for the existence of comparative advantage.