<blockquote>
<p>I would like to know if Ricardian comparative advantage leads to higher quality of goods and services in an economy.</p>
</blockquote>
<p>Ricardian comparative advantage theory does not make any prediction about quality of goods at all. In Ricardian model the technical process and quality of goods is same regardless of whether countries specialize or not.</p>
<p>There are other theories that deal with heterogeneous goods but in Ricardian comparative advantage goods are homogenous.</p>
<blockquote>
<p>A secondary, related question is: If it does not lead to higher quality goods and services, then when exactly is the point of it? Mere productivity, i.e., more &quot;stuff&quot;?</p>
</blockquote>
<p>Not just necessarily more stuff but some combination of higher production and lower prices or lower prices, keeping all other things equal than before.</p>
<p>However, as a side note, in Ricardian model quality of goods does not change, you can get changes in quality as a response to trade in richer set of models. For example, the call center is good example where probably customers care mostly about low costs, so they are willing to trade off bit worse English for lower prices, but that is completely different mechanism form the Ricardian mechanism where the point is that trade allows you to go beyond your production possibility frontier by tapping into the foreign production function provided foreign country does not have exactly the same marginal rate of transformation as home country.</p>

CC BY-SA 4.0
2023-04-23T15:12:16.013Z
2023-04-23T15:12:16.013Z
1muflon1
<p>I'm not certain where you came across this example, but I believe that the standard model of Ricardian Trade theory may not be applicable to the situation between India and the US. One of the reasons for this is that, in the Ricardian trade model, labor is assumed to be immobile across countries. However, in reality, many highly skilled Indians are employed in top institutions acquiring top management positions, and engineering jobs in the US.</p>
<p>Furthermore, call center services require not only proficiency in English, but also qualities such as hospitality and politeness. It is unclear whether the US is more productive than India in these areas. While it is true that India can provide these services at a lower cost than the US, this alone may not fully explain why profit-maximizing companies in the US choose to establish call centers in India.</p>
<p>To address your query regarding the Ricardian model, it is not solely concerned with producing more goods. Rather, it aims to achieve greater consumer surplus. If there is any reduction in quality due to trade, this will be reflected in lower prices for the services or of the associated products, resulting in a superior overall outcome for the consumers.</p>

CC BY-SA 4.0
2023-04-23T16:24:59.310Z
2023-04-23T16:24:59.310Z
Amit
<p>I would like to know if Ricardian comparative advantage leads to higher quality of goods and services in an economy.</p>
<p>I did read of an example that suggests that this need not be the case: The example being that of the USA which is more productive than India in a lot of areas, due to which it is sensible for them to export call-center services to India, even though the quality of the service may suffer due to language barriers.</p>
<p>A secondary, related question is: If it does not lead to higher quality goods and services, then when exactly is the point of it? Mere productivity, i.e., more &quot;stuff&quot;?</p>

<comparative-advantage>
Does Ricardian comparative advantage lead to higher quality goods and services?
Joebevo
# Does Ricardian comparative advantage lead to higher quality goods and services?

(Asked by: username_0 on 2023-04-23)

I would like to know if Ricardian comparative advantage leads to higher quality of goods and services in an economy.

I did read of an example that suggests that this need not be the case: The example being that of the USA which is more productive than India in a lot of areas, due to which it is sensible for them to export call-center services to India, even though the quality of the service may suffer due to language barriers.

A secondary, related question is: If it does not lead to higher quality goods and services, then when exactly is the point of it? Mere productivity, i.e., more "stuff"?

**Tags:** comparative-advantage


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## 2 answers

### Answer by username_1 on 2023-04-23. Score: 1

> I would like to know if Ricardian comparative advantage leads to higher quality of goods and services in an economy.

Ricardian comparative advantage theory does not make any prediction about quality of goods at all. In Ricardian model the technical process and quality of goods is same regardless of whether countries specialize or not.

There are other theories that deal with heterogeneous goods but in Ricardian comparative advantage goods are homogenous.

> A secondary, related question is: If it does not lead to higher quality goods and services, then when exactly is the point of it? Mere productivity, i.e., more "stuff"?

Not just necessarily more stuff but some combination of higher production and lower prices or lower prices, keeping all other things equal than before.

However, as a side note, in Ricardian model quality of goods does not change, you can get changes in quality as a response to trade in richer set of models. For example, the call center is good example where probably customers care mostly about low costs, so they are willing to trade off bit worse English for lower prices, but that is completely different mechanism form the Ricardian mechanism where the point is that trade allows you to go beyond your production possibility frontier by tapping into the foreign production function provided foreign country does not have exactly the same marginal rate of transformation as home country.


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### Answer by username_2 on 2023-04-23. Score: 1

I'm not certain where you came across this example, but I believe that the standard model of Ricardian Trade theory may not be applicable to the situation between India and the US. One of the reasons for this is that, in the Ricardian trade model, labor is assumed to be immobile across countries. However, in reality, many highly skilled Indians are employed in top institutions acquiring top management positions, and engineering jobs in the US.

Furthermore, call center services require not only proficiency in English, but also qualities such as hospitality and politeness. It is unclear whether the US is more productive than India in these areas. While it is true that India can provide these services at a lower cost than the US, this alone may not fully explain why profit-maximizing companies in the US choose to establish call centers in India.

To address your query regarding the Ricardian model, it is not solely concerned with producing more goods. Rather, it aims to achieve greater consumer surplus. If there is any reduction in quality due to trade, this will be reflected in lower prices for the services or of the associated products, resulting in a superior overall outcome for the consumers.


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