Need For A Modified Theoretical Model ( contd from previous post ) In contrast, at the low level of development supply and demand conditions for the production of technically sophisticated goods are likely to be unfavourable for lack of sufficient domestic demand, availability of required inputs, and technical know how etc.. However, as a country moves along the scale of development, the conditions are likely to become more favourable. Therefore the unit cost of production in commodity category ii would be negatively related with the level of development, and the advanced countries would specialise in commodity category ii The countries at a relatively low level of development can produce goods in category i at costs comparable to or lower than those in advanced countries because of existence of demand for such goods, low wage rate and moreover, these goods require low physical and human capital intensities. As wage rates vary more widely across countries than capital costs and they rise with the level of development, the unit cost of production in commodity category i can be expected to rise with the level of development. According to our extended /modified theory of comparative costs, under developed or semi developed countries would have comparative advantage in producing and exporting labour intensive, low technology based goods. The advanced countries would have comparative advantage in high skill intensive , using R&D based sophisticated technology, goods. It is also possible to explain exceptions to the general pattern of trade and specialisation within the framework of our model After joining the Punjab School of Economics , Guru Nanak Dev University, I submitted a paper, Theory of Comparative Costs And the Level of Development to the Indian Journal of Economics, started by Stanely Jevons, that was published in its Vol LV111, No 229, Oct. 1977. it is available at Researchgate free of cost. Had I stayed back at the University of Birmingham, I would have tried to operationalise it to provide explanation for changing pattern of world trade and specialisation within the framework economic theory. If someone wants to work on the model, I will be happy to extend my support or even agree for a joint exercise
Posted on: Tue, 20 Jan 2015 10:03:08 +0000
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