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- University College London (UCL)
Lecture slides of international trade module
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International TradeBA Course
UCL, SSEES
Lecture 2: The Ricardian Model
Idil Uz Akdogan
i.akdogan@ucl.ac.uk
,Lecture Overview
• Opportunity costs and comparative advantage
• A one factor Ricardian model
• Production possibilities
• Gains from trade
• Wages and trade
,Theories of Why Trade Occurs
• Differences across countries in labour, labour skills,
physical capital, natural resources, and technology.
• Economies of scale (larger scale of production is
more efficient)
Result:
Efficient allocation, specialization and higher
productivity!!
, Introduction
• The Ricardian model (chapter 3) says differences in
productivity of labour between countries cause producti
differences, leading to gains from trade.
– Differences in productivity are usually explained by
differences in technology.
• The Heckscher-Ohlin model (chapter 4) says difference
labor, labor skills, physical capital and land between
countries cause productive differences, leading to gains
from trade.
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