Absolute Advantage Theory and North-South Trade

Debarshi Das

Abstract


Resurgence of Asian economies and losing competitiveness of first world economies have added new question marks over the applicability of comparative advantage theories of trade. Absolute advantage theory may provide a more plausible framework. The essay delineates a model incorporating absolute advantage theory and attempts to show that the present phase of rising aggregate wellbeing in developing countries might be accompanied by widening income inequality.

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