Consider the Ricardian model taught in the class with only two countries in the world, China and Singapore, producing two goods Rice and Cloth. China has comparative advantage in Cloth and Singapore in Rice！Ricardian model says they should specialize according to their comparative advantage. Why China may not follow such a rule, whilefor Singapore it is not a concern?
The difference between the two countries in question, Singapore and China, is that the former is a developed nation and China is a developing nation. Ricardian theory is actually applicable only to nations that are developed and at their full employment level. As for the developing countries, they are not near full employment level, and in a gradual process of change in quality of labor, capital and technology, and is dynamic in that sense. The Ricardian theory assumes a static nature associated with a country, which is not so in the case of China. There is a component of growth associated and it is very much significant and thus makes the choice of specializing according to their comparative advantage difficult, because the dynamics of this advantage keeps changing owing to the developing nature of the country.
Consider the Ricardian model taught in the class with only two countries in the world, China...