The theory of comparative advantage It was established by the economist David Ricardo in 1817, and was based on the profits obtained through international trade.
David Ricardo was an English economist, born in London in 1772, his father was a stockbroker, perhaps that was his greatest influence on his vocation as an economist and stockbroker. He was self-taught and after having read and learned Adam Smith's theory, he managed to stipulate his own thought and contribution to economics, which deals with the comparative advantage.
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His thinking was clearly liberal, in favor of economic policies that promoted economic growth based on the growth of the great capitalists.
In this article you will find:
Definition of comparative advantage.
The definition and application of this theory is directly related to international trade by virtue of the fact that it is the meeting point between countries that compete with each other. for demonstrating its strength in the production of specific products, therefore, different countries have the tendency to specialize in the production and exploitation of products, specific goods, services or resources, at a lower cost than those of other countries, since they use fewer resources for the development of products compared to other nations.
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In comparative advantage theory It is the ability of a person, company and / or state to manufacture and market a product using fewer resources than another person, company and / or country. That is, according to its production cost structure and counteracting its production Comparatively with that of others, its advantage would be represented in the lowest possible cost as producer.
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Characteristics of comparative advantage in a country
- Even if a country does not achieve the absolute advantage of a product, it can achieve comparative advantage through international trade Due to the specialization in the production of those goods that allow it to obtain a lower cost in terms of its disadvantage, refer.
- Each productive entity (company and country) specializes in the production of the service where it is most efficient.
- The countries choose according to the availability of resources, which production they will be able to industrialize better in order to export.
- The comparative advantage comes from the opportunity cost that will be granted to the production of each good.
Importance of comparative advantage
Its importance lies in the fact that thanks to the exchange of trade between different countries (what is known as international trade) it is possible to develop and increase in a peculiar way the production and heritage of the countries.
Promoting competitiveness among nations based on the production of goods and services, highlighting the advantages for the industrialization of these elements or products.
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Likewise, countries manage to increase their income as they study the market in order to introduce their products for their trade.
Nations benefit equally through the exchange of products. While they economize in the production of goods with their own resources, they also manage to import or acquire products that they do not have within their own country, since their production would be extremely difficult or expensive for them, but they can enjoy or dispose of them through importation from countries that produce them easily and at a lower cost. cost.
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The theory of comparative advantage It is based on the idea of a productive economy, where each country specializes in production and exports those goods that they do best. Which strongly influences the dynamics of international trade between different countries. That is, the factors of production of the countries determine the comparative advantage, since their production depends on the abundance of resources available for production and export.
Causes of comparative advantage
Climatic conditions and availability of natural resources:
It refers to the natural resources of the nation, since the closer the countries are to the equatorial belt, the greater availability of resources the countries have for the cultivation of land and production of goods and services or products in the open air, as opposed to countries with or type of climate such as temperate where resources are not equal.
However, cold lands produce other types of products that are exported to hot climates. Hence, similar countries in climatic conditions export the same type of products to Ecuador, such as bananas, bananas, sugar, cocoa, etc.
Disparity between endowments of natural resources:
Just as there are advantages in natural resources, there are also advantages in non-renewable natural resources such as minerals such as oil, gold, diamonds, etc.
Therefore, in countries where these types of resources abound, they have the advantage over the production of derivatives of these resources with respect to other countries that do not have the same resources.
Differences between countries with advantages in terms of technology and specialization:
It may be the case where the different ones have similarity in resources, but have advantages with respect to to the specialization of its human resources and the acquisition of technology for the development of products.
