Macroeconomics › Section T · International trade › Topic T.2
Gains from trade when one country is better at everything
If a rich, highly productive country can make every good more cheaply in terms of labour, why would it trade with a poorer one? Ricardo's answer, that both still gain, is one of the most surprising and most tested results in economics.
In this topic
- The puzzle
- Relative productivity
- Worked example: finding the advantages
- Worked example: moving workers
- Sharing the gains
- Ricardo's own example
- The same logic at a smaller scale
- Wages and the low-wage worry
- Common mistakes to avoid
- Key takeaways
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