英语论文网

Classical Trade Theory and Comparative Advantage
References
Textbooks
Appleyard, D., Field, A. and Cobb, S. (2005) International Economics, McGraw-Hill Ch. 3
Husted, S. and Melvin, M. (2007), International Economics, Addison-Wesley Ch. 3
代写留学生论文Krugman, P. and Obstfeld, M. (2009) International Economics: Theory and Policy Addison-Wesley Ch. 2 & 3

Articles
Balassa, B. (1963) "An Empirical Demonstration of Classical Comparative Cost Theory“, The Review of Economics and Statistics, 45(3), pp. 231-38.
Helpman, E. (1999), “The Structure of Foreign Trade”, Journal of Economic Perspectives, 13(2), pp.121-144.
Krugman, P. (1997), “Ricardo’s difficult idea”, https://web.mit.edu/krugman/www/ricardo.htm
Importance of International Trade
World GDP is over 7 times what it was in 1950 but volume of world exports is now over 27 times what is was in 19501
MASSIVE INCREASE IN WORLD TRADE

But why?
 Reduction in trade barriers is certainly an important factor
In 2007 the EU was the top exporter and importer of both goods and services in the world (International Trade Statistics, WTO)

So who does the EU trade with?
What do we trade?
In 2007 83% of the EU exports were manufactures and 61% of imports were manufactures (International Trade Statistics, WTO)

World trade is similarly dominated by manufactures (Krugman and Obstfeld, 2009)

Developing countries are also increasingly export manufactures and less agricultural products (Krugman and Obstfeld, 2009)
It is very important to understand patterns of trade, the terms of trade as well as the gains from trade.
 
This will then allow us to assess the impact of various trade policies.
Self sufficiency means no specialisation therefore low productivity
Exchange allows specialisation in what we are good at producing
This applies to both internal and external trade
Opportunity cost of self sufficiency is the loss of foregone output in high efficiency areas
Specialisation with trade allows overall production to increase
If Britain can produce cloth more efficiently than America and…
America can produce food more efficiently than Britain….
Both countries can gain from trade if they specialise in what they do best
On this basis Adam Smith advocated free trade (allows division of labour)
If Britain exchanges 30 units of cloth for 60 units of food…..
Both countries could have 30  units of cloth and 60 units of food
Britain gains 15 units of food and America gains 15 units of cloth
 But what if America is more efficient than Britain at producing both food and cloth?

David Ricardo was an English political economist in the early 1800s who introduced the concept of comparative advantage.
Ricardo demonstrated that trade can be beneficial with only comparative advantage
A country will export a good in which their productivity is relatively high.

One factor of production – labour
Two goods
Two countries
Labour is immobile internationally but mobile nationally (=> wages are equalised nationally but not internationally)
Zero transport costs
Free trade
America’s superiority in cloth is 40/30 = 33% whereas superiority in food is 80/45 = 78%
 => America will still export food
 Notice if the ratios were the same there would be no basis for trade
Hence Britain has a comparative advantage in cloth production
&nbs本论文由英语论文网提供整理，提供论文代写，英语论文代写，代写论文，代写英语论文，代写留学生论文，代写英文论文，留学生论文代写相关核心关键词搜索。