Question

What is the difference between Ricardo’s theory of comparative advantage and the HeckscherOhlin theory of comparative advantage? Do they lead to different conclusions? Explain.

Answer 1

Ricardo's theory of comparitive advantage states that a country will specialise in that line of production in which it has greater comparitive advantage than other countries and will import commodities from other countries in which it has relative cost disadvantage.

HecksOhlin theory of comparitive advantage states that difference in comparitive advantage comes from difference in factor abundance and factor intensity of goods. Countries will produce relatively more goods that use their relatively abundant factors relatively intensive.