How does Comparative Advantage exist today?

Question

Another question I dont get.

Answer 1

I am assuming you are talking about the comparative advantage certain nations have in certain industries in global trade.

Comparative advantage exists where a nation has lower marginal costs to produce a good or service due to educational differences, geographical differences, differences in legal structures, skill differences, wealth differences and so on.

In the United States, the primary comparative advantage is in the capacity to improve processes and the use of intellectual knowledge. Certain nations, such as Japan and Germany have a superior comparative advantage in this area, but the United States grants greater legal flexibility in employment resulting in high comparative wages in the United States

The median German worker makes more than the median American worker as a result. Germany produces the same physical output as the United States but with 20% of the workforce. It uses capital in a much more intensive manner. Even though German workers are paid more, they cost less due to the substitution of capital for workers.

Likewise, in Bangladesh the median worker produces 1/30th of what the median American worker produces, if memory serves me correct. Bangladeshi workers hold a comparative advantage in those low wage tasks which are below American minimum wage and require little skill. They do the jobs anyone could do, but which are undesired because they would have to pay so little in order to be competitive. This however, is an advantage to Bangladesh in that it could lock up certain industries and as skills rise, prices for the goods and wages could rise, in the absence of competitors.

To be competitive as a worker in America today, you need to be in fields that no one else wants to be in, such as bricklayer or CPA and so consequently pay good wages. Lower product positions, such as worker in McDonald's add much less to the national well being and as such are paid less.

Answer 2

comparative advantage is the advantage that the world gains from the division of labour we learned this in terms of countries, say america is better at producing oranges and tractors and that namibia produces both also but not as well lets also say that each country produces only these two items devoting half of their resources to each namibia isnt so bad at making oranges so america, although it is better at both lets namibia make only oranges while they make only tractors the outcome is that overall the world benefits this is also to do with the ratios between products e.g. america can make 1 tractor for the price of 5 tonnes of oranges while namibia can make 1 for the price of 20 tonnes so here america is much better at making tractors and in this respect has a comparative advantage