What thing determines comparative advantage among countries-00736

Online Quiz This subjective question is related to the book/course vu cs501 Advance Computer Architecture. It can also be found in vu cs501 Mid Term Solved Past Paper No. 2.

Question 1: What thing determines comparative advantage among countries according to Hechshcer-Ohlin? What is the criticism against their argument?
Answer:

According to Hechshcer-Ohlin suppose we are given two countries one abundant in labour and one abundant in capital and a labour-intensive good and a capital intensive good, the labour abundant country will have comparative advantage in the production of the labour-intensive good while the capital abundant country will have comparative advantage in the capital-intensive good.

So the determinants of comparative advantage among countries according to Hechshcer-Ohlin is capital goods and labour intensive goods.

Critics argued that comparative advantage can and should be viewed in a dynamic (time-varying) sense, and that it was not wise to rule out the possibility of Pakistan developing comparative advantage in cars at some future point in time.

Consequent:

The major criticism leveled against Hechscher-Ohlin type trade theories are that they views comparative advantage in an essentially static sense; i.e. if Pakistan is better at producing cotton and Japan better at producing, then this situation will always prevail.


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