1 Answer | Add Yours
In general, developing countries will enjoy a comparative advantage over developed countries during the maturity stage of a product's life cycle.
In the earlier stages, the costs of production of the product have not yet been reduced as much as they can be. The product is still at the point where it and the process of making it are being developed and refined. This will often require more technical know-how of the sort that developed countries have as a comparative advantage.
As the refinements have been finished and the product moves into the maturity stage of the life cycle, costs become the most important factor in a producer's profitability. At this point, the production of the product is likely to move to developing countries where low labor costs provide a comparative advantage.
We’ve answered 317,431 questions. We can answer yours, too.Ask a question