Question

Does intra-industry trade contradict the theory of comparative advantage?

Short answer

No

Step-by-step solution

Step 1. Definition

Intra-industry trade refers to the trade of similar products across international borders. Comparative advantage refers to the ability to produce a product at a comparatively lower opportunity cost.

Step 2. Explanation 

Intra-industry trade does not contradict comparative advantage rather it broadens its concept. Traditionally, gains from comparative advantage came from climate, geography, education, or skill of workers. But in Intra-industry trade, gains trade comes from specialized learning about specific products and economies of scale.

Comparative advantage can thus be dynamic and change according to the development of new skills and splitting up of the value chain.