Research On Realization Mechanism Of Comparative Advantage

Adam Smith brought forward the absolute advantage theory in"An Inquiry into the Nature and Causes of the Wealth of Nations"in 1776, he considered that the absolute difference of each nation's productivity was the main cause of international trade. However, with the development of international trade, the absolute advantage theory can not explain reality that the countries which are absolutely behindhand in every respect are also involved in the international trade. Aiming at the theory confusion of Adam Smith, David Ricardo put forward the comparative advantage , he considered that the base of the international division of labor and trade was not the absolute advantage, but the comparative advantage. He considered each country should specialize the product which its had comparative advantage and import the product without comparative advantage, in this way, each country could receive benefit. Many economists have expatiated and developed the comparative advantage in multi-angle, so that the comparative advantage theory has become the base of modern international trade theory. However, the theory of comparative advantage has encountered an unavoidable contradiction, namely the consumer won't purchase the product until the product is absolutely cheaper than all the others, the sellers won't sell their product in a place until the price in this place is absolutely higher than all the others. This is a radical principle of micro-economics, but the theory of comparative advantage is contrary to it. The essence of this problem is the conversion from the comparative advantage of productivity to the absolute advantage of price , that is ,the conversion mechanism problem from comparative advantage to absolute advantage. This paper just study this problem. Review the theory of comparative Advantage firstly, and recall the history development of comparative advantage theory and briefly reviewing the innovation and lack of various stages. After that is the implementation mechanism from the comparative advantage. This chapter analyses the conversion from comparative advantage to absolute advantage of price in the form of mathematical model. The third part begins to analyze the realization of comparative advantage in multi-dimensional policy impact , actually this chapter is the development of ChapterⅡ, that is closer to reality in the an analysis of the realization of comparative advantage under a more practical conditions. The last part is the empirical test of the implementation mechanism from the comparative advantage in China. in the same time, this chapter gives several policy recommendations for the development of the international trade in China.