Comparative Advantage Of The Dynamic Analysis

Comparative advantage theorem originated in the time of the classical economics with the assumption of perfect competition and a static view. As the new trade phenomena keeping emerging, the traditional theory loses power in explanation. New trade theory put the comparative advantages in a more practical and rational place. Either by analyzing on the basis of imperfect competition, or by adding the factor of time to produce dynamic theory, or both, the comparative advantage theory enhances its capacity of exponent. However, all these are sporadically advanced in different modern trade theories without being systematized. So stripping comparative advantages from various trade theories and deriving the main thread of its development, the paper tries to make up for the deficiency, and then the practical significance is suggested.The paper falls into four parts. The first chapter introduces the real meaning of comparative advantages, followed by the ways of expression and the development of the theory. The second one generalizes theories which are static ones based upon perfect competition assumption. Cases study seems to undermine the pure theory and this may attribute to the assumption of perfect competition, which is obviously unrealistic. But the core of the theory is still valuable and can be a guide to the industry selection in recent China. The third one focuses on the static comparative advantages on imperfect competition. It is a great progress to relax the assumption to imperfect competition while the static analyst in it is a drawback. Thus comprising both scientific factors and limitations, the theory can only be partly applied to the practice. The fourth one further analyze the dynamic comparative advantages on the basic of imperfect competition. Technology, factors movement and the policy orientation of the government are all conducive to the creation of comparative advantages. With a characteristic illustration of the growth of software industry in India, some suggestions are brought out to help establish or increase advantages in China.