1 Answer | Add Yours
No lay person can possibly know for certain what a specific country’s comparative advantage is. We cannot simply look at a country in superficial way and know for sure. To identify a country’s comparative advantage we have to compare the production costs of a variety of countries. Not only that, but we are not looking at financial or resource costs. Instead, we are looking at opportunity costs. So, if we want to ask what Bangladesh’s comparative advantage is, we have to look at all the things they could make, see what they give up to produce each of these, and compare that to the opportunity costs of other countries in the world. This is a job for a few experts with access to a lot of information.
So what can we say about Bangladesh and comparative advantage? We can say that their comparative advantage appears to be in labor-intensive work that does not add much value to a product. In other words, their comparative advantage is in making cheap goods using a lot of unskilled labor. We can infer this because that (in particular, clothing) is what they tend to make and export.
What this means is that Bangladesh’s workforce does not have much else that they can do that is profitable. When they use their resources to make clothes, they are not giving much else up. They would not be able to use their workers to make anything that is much more valuable. By contrast, other countries like China or the US have better uses for their workers.
We’ve answered 302,573 questions. We can answer yours, too.Ask a question