Weak links in the chain of comparative advantage

Abstract

This paper examines the proposition that trade in many commodities can be explained by a chain of comparative advantage. It is first shown, in a two-country, two-factor model, that trade accords with the ranking of goods by factor intensity if there are unequal factor prices, free trade, and only final goods. This result continues to hold if either trade impediments or intermediate products are introduced. However, if both are present, the chain proposition breaks down. Finally, with many countries, it is shown that trade impediments alone can invalidate the chain proposition.