Working Paper


J. Peter Neary



f10 gole general oligopolistic equilibrium comparative advantage international trade market integration comparative and competitive advantage comparative and absolute advantage international trade exchange rate protection info eu repo classification jel f10 oligopolies info eu repo classification jel f12 f12

Competitive versus comparative advantage (2002)

Abstract I explore the interactions between comparative, competitive and absolute advantage in a two-country model of oligopoly in general equilibrium. Comparative advantage always determines the direction of trade, but both competitive and absolute advantage affect resource allocation, trade patterns and trade volumes. Competitive advantage in the sense of more home firms drives foreign firms out of marginal sectors but also makes some marginal home sectors uncompetitive. Absolute advantage in the sense of a uniform fall in home costs tends to raise home output in all sectors but also leads both countries to specialise less in accordance with comparative advantage.
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J. Peter Neary

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J. Peter Neary
University College Dublin
Total Publications: 79