Export and comparative advantage
I quote Ricardo from Wikipedia here: "if two countries capable of producing two commodities engage in the free market, then each country will increase its overall consumption by exporting the good for which it has a comparative advantage while importing the other good, provided that there exist differences in labor productivity between both countries"
I have found in many cases when countries export and import the same good. Why so much ado about nothing ? If you have a good then why export it and then import it ? Is this a case of difference in quality of goods ? Or a case of inter-temporal pricing and arbitrage seeking behavior of manufacturers ?
Consider an example of banana here. (Screenshot attached). Belgium-Luxembourg both imports and exports bananas. Why ? I have seen similar behavior of countries for iron ore, etc. as well. Just confuses me. Can someone throw some light ? Thanks in advance.
Link: (html)https://atlas.media.mit.edu/en/profile/hs/0803/(h…
It might have to do with shipping and transportation costs. So Belgium might import bananas from Costa Rica and then export them to the rest of Europe, rather than each country import bananas from Costa Rica. Just makes it easier for all of Europe to get them.
At vero nam quia nesciunt. Deleniti sint eligendi labore sit blanditiis et exercitationem. Doloremque excepturi quis aliquam aliquam expedita aliquam.
Numquam eius animi distinctio ducimus est quasi consectetur. Dicta veritatis consequatur repudiandae.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...