A GENERAL-MODEL OF COMPARATIVE ADVANTAGE WITH 2 FACTORS AND A CONTINUUM OF GOODS

This paper develops a general model of comparative advantage with two factors and a continuum of goods, which incorporates the Ricardian and Heckscher-Ohlin-Samuelson models as two special cases, and which can illustrate how technology, factor endowments, world income, world prices and demand preferences influence trade pattern with a single graph. Further, we have derived an intuitive solution of a unique trade pattern under factor price equalization: countries specialize in goods that use intensively abundant factors, and some middle goods in terms of capital intensity are not traded even in the absence of trade barriers.