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THE COMPARATIVE ADVANTAGE THEORY

5 November, 2015 - 11:13

The Comparative Advantage Theory as applied to new products states that a country will develop an advantage over others if it has a better quality of labor rather than merely more of it. Thus, in the case of high-technology goods, the Heckscher-Ohlin theorem implies that a country with a skilled labor force will export high-technology products (that is, products produced with the country's most abundant resource, skilled labor) and countries with unskilled labor forces will export low-technology goods (because that is what can be produced with their most abundant resource, unskilled labor).