An Inframarginal Analysis of the Ricardian Model

Wenli Cheng, Jeffrey Sachs and Xiaokai Yang

Review of International Economics, 2000, vol. 8, issue 2, 208-220

Abstract: This paper shows that a 2 × 2 Ricardian model has a unique general equilibrium, and the comparative statics of the equilibrium involve discontinuous jumps. If partial division of labor occurs in equilibrium, the country producing both goods would impose a tariff, whereas the country producing a single good would prefer unilateral free trade. If complete division of labor occurs in equilibrium, both countries would negotiate to achieve free trade. In a model with three countries, the country which does not have a comparative advantage relative to the other two countries, and/or which has low transaction efficiency, may be excluded from trade.

Date: 2000
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https://doi.org/10.1111/1467-9396.00216

Related works:
Chapter: AN INFRAMARGINAL ANALYSIS OF THE RICARDIAN MODEL (2005)
Working Paper: An Infra-marginal Analysis of the Ricardian Model (1999)
Working Paper: An Infra-marginal Analysis of the Ricardian Model (1999)
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