Comments on the “the main contribution of the Ricardian trade theory” by Ronald W. Jones

Abstract

The aim of this chapter is a critical assessment of the Ricardian model and its usefulness in research. It starts with explaining the analytical difficulties by which the two-by-two model is characterized in comparison to an endowment model. Further, it is examined why it is challenging to add further dimensions and extend the basic example to a three-by-three case. Three possible solutions of the challenges related to many-good and many-country cases are discussed. Firstly, understand the possible efficient outcomes of these cases based on Jones (The Review of Economic Studies 28(3):161-175, 1961). Secondly, introduce the many-good-continuum model of Dornbusch, Fischer and Samuelson (The American Economic Review 67(5):823-839, 1977). Thirdly, find an empirical approach such as Eaton and Kortum (Econometrica 70(5):1741-1779, 2002).