Suchergebnisse

AbstractThis study conducts a detailed analysis of the production possibility frontier (PPF) in an economy with two goods, each produced using labour and a specific factor as inputs, and public infrastructure, which has positive externalities on the production of each good. We show that if the elasticity of a specific factor input into production is sufficiently small, the PPF has a concave–convex–concave shape. Although our model is similar to the one developed in 1992 by Richard H. Clarida and Ronald Findlay, this possibility was overlooked in their analysis and it can generate trade patterns that are against the law of comparative advantage. Nevertheless, trade is always gainful and, as in the existing studies, trade openness increases the provision of public infrastructure in a country exporting goods whose productivity is highly dependent on infrastructure. We also examine the relationship between factor endowments and comparative advantage.

The paper has two objetives. The first is to discuss whether developing countries can benefit by specializing according to their comparative advantage. The second objetive is to discuss if an economy that adopts a free market policy will in effect achieve greater economic efficiency. The author concludes that specialization according to comparative advantage would indeed benefit a country. He also argues that in an economy ruled by free competition and without governmental interference, market signals and forces and not by themselves sufficient to provide the necessary incentives to producers so that they fully use the avaliable resources, and produce and trade according to comparative advantage.