Absolute and Comparative Advantage, Reconsidered: The Pattern of International Trade with Optimal Saving

This paper obtains new results about absolute and comparative advantage, by introducing international technological differences into the three-sector Findlay-Komiya and two-sector Oniki-Uzawa-Stiglitz models ofopen-economy growth with optimal saving. For example, ifa country has the same Hicks-neutral advantage in all industries, it exports the capital-intensive tradable, even though the technological advantage is only absolute rather than comparative. Alternatively, even a small comparative advantage for some good is sufficient for the advanced country to export this product, regardless of relative factor supplies. In either case, the fundamental reason for trade is technological superiority rather than factor abundance.