GINS 2010 Lecture Notes - Lecture 5: Human Capital, Comparative Advantage, Absolute Advantage

• School: Carleton University
• Department: Global and International Studies
• Course: GINS 2010
• Professor: Pablo Heinrich

Document Summary

Concepts and relations you should have grasped by now. Comparative advantage theory assumed only one input for production: labour. Labour was uniformly skilled to produce all goods equally, perfectly mobile across jobs, industries, etc. there was full employment. Labour is not equally skilled, different jobs require different skills. Production requires other inputs (aka, factors): capital and/or technology, natural resources and/or land. Labour, capital or technology, land or natural resources. In more complex models of trade, multiple inputs (factors) for production are considered: If those factors are also not uniformly fitted for production of a certain tradable good, then our comparative advantage depends on how they are allocated. If those factors are not equally available for production, then our comparative advantage will tend towards what is more abundant, relatively speaking. I(cid:373)proves upo(cid:374) ri(cid:272)ardo"s (cid:272)o(cid:373)parative adva(cid:374)tage theory (cid:271)y i(cid:374)di(cid:272)ati(cid:374)g that other i(cid:374)puts tha(cid:374) la(cid:271)our are also required for production, and that all factors are not uniformly fitted to produce any specific good.