Ricardian model

The Ricardian model is a model used in economics, named after David Ricardo. It is an easy way to explain trade between two countries, and the resulting gains. The model only uses workforce productivity to explain differences in international trade. Comparative advantages result from the difference of a single economic factor, that is labor. Workforces in different countries have different levels of productivity, and the resulting opportunity costs are different. In this regard, Ricardo used the ideas of Adam Smith regarding Absolute advantage, and developed them further. The model is described in Ricardo's main work, On the Principles of Political Economy and Taxation, published in 1817.

Category:Economics models