A country is said to have an absolute advantage over another country in the production of a good or service if it can produce that good or service using fewer real resources. Equivalently, using the same inputs, the country can produce more output. The concept of absolute advantage can also be applied to other economic entities, such as regions, cities, or firms, but we will focus attention on countries, specifically in relation to their production decisions and international trade flows. The fallacy of equating absolute advantages with cost advantages is a never-ending source of confusion. Deviations between the two are caused by the fact that real resources may receive different remunerations in different countries.
|Keywords||comparative advantage, international trade policy, world economy|
|JEL||F0, International Economics: General (jel)|
|Publisher||Princeton University Press, Princeton NJ|
van Marrewijk, J.G.M. (2008). Absolute advantage. Princeton University Press, Princeton NJ. Retrieved from http://hdl.handle.net/1765/12976