Ask Question, Ask an Expert

+61-413 786 465

info@mywordsolution.com

Ask International Economics Expert

Criticism against Hechscher-Ohlin type trade theories is explained below:

The foremost criticism leveled against Hechscher-Ohlin type trade theories are that they views comparative advantage in the essentially static sense; that is if Pakistan is better at producing cotton and Japan better is at producing, then this situation will always exist. Critics argued that the comparative advantage can and should be viewed in a dynamic (time-varying) sense, and that it was not wise at all to rule out the possibility of Pakistan developing comparative advantage in cars in future.

Of course,  the  policy  advice  of  such  dynamic  comparative advantage theorists  was  very different from the above 6. These people argued that the countries build comparative advantage in the capital-intensive goods by protecting their domestic industries against the cheap industry manufactured imports from abroad. The protection is operationalised through tariffs which mean tax on imports or the outright quota restrictions. The output from the local infant industries then is used to substitute the imports of the manufactures. Various LICs (such as Mexico, India) consistently followed this policy prescription in the mid-20th century, but with the mixed results.

While it is true that number of countries pursued, fully or partly, the policy prescription suggested by the dynamic comparative advantage theories, only some of them were genuinely successful in changing their comparative advantage: Korea developed its comparative advantage in the auto industry, Malaysia in shipbuilding and consumer electronics, Taiwan in microchips, Brazil in light aircraft. Of these, most of the countries (like the East Asian tigers) had the marked export orientation in their industrialization and trade policies. This is what keeps them apart from the failures, which had a much more import-substituting approach to the industrialization..

International Economics, Economics

  • Category:- International Economics
  • Reference No.:- M9504464

Have any Question?


Related Questions in International Economics

Legal aspects of international trade and enterprisetopic

Legal Aspects of International Trade and Enterprise TOPIC for ASSIGNMENT: Bumper Development Corp. Ltd. V. Commissioner of Police of the Metropolis and Others (For case review, refer Textbook: pp. 150-153) ASSIGNMENT GUI ...

Part of the return on the investment comes from the asset

Part of the return on the investment comes from the asset itself and part from the currency of the foreign currency. agree or disagree?

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

Why might a bank avoid the use of interest rate swaps even

Why might a bank avoid the use of interest rate swaps, even when the institution is exposed to significant interest rate

Describe the difference between zero coupon bonds and

Describe the difference between zero coupon bonds and coupon bonds. Under what conditions will a coupon bond sell at a p

Compute the present value of an annuity of 880 per year

Compute the present value of an annuity of $ 880 per year for 16 years, given a discount rate of 6 percent per annum. As

Compute the present value of an 1150 payment made in ten

Compute the present value of an $1,150 payment made in ten years when the discount rate is 12 percent. (Do not round int

Compute the present value of an annuity of 699 per year

Compute the present value of an annuity of $ 699 per year for 19 years, given a discount rate of 6 percent per annum. As