Beyond Ricardian Model: An Optimal Commodity Distribution Based on Absolute Advantage for Multi-Country Multi-Commodity
Ricardo’s comparative advantage model asserts that international trade will make every single participantcountry better off if they traded goods in which they have comparative advantage. Tian (2008) has generalizedand expanded this Ricardo's 2-country, 2-commodity comparative advantage into a multi-country,multi-commodity model. His methodology, however, occasionally fails to achieve optimal commoditydistribution or to facilitate international trade even if it succeeds in optimal distribution, for it results in a highdegree of difference in countries’ commodity prices. This paper proposes an algorithm that selects countries’comparatively advantageous goods for multi-country, multi-commodity model based on their absolute advantage.The proposed algorithm simply selects a commodity with the maximum absolute advantage - the minimum price- from each country and reassigns commodities of over-assigned countries to under-assigned countries. Thisabsolute advantage model (AAA) is found to be much simpler than Tian’s comparative advantage method and toyield superior results.