A critique of modern theories of trade (original) (raw)
Towards the Importance of Theories of Trade as Part of Trade Science
Studia commercialia Bratislavensia, 2012
Theory of trade is a name dealing with trade as a scientific discipline, which is made up of a set of generalised knowledge of trade, of laws determining its essence and operation. This scientific discipline also includes the knowledge of the origin of the relations, operation of these relations, and their means and tools in trade. Theory of trade is a summary of numerous interrelated and partial theories of trade, which are based on the pillars of general economic theory and general trade theory. The aim of the paper is to highlight the importance of some of these theories with focus on their historical retrospective as well as to evaluate to what extent each of these theories is justified.
LITERATURE REVIEW ON THEORIES OF INTERNATIONAL TRADE AND POLICIES BEHIND MODERN WORLD TRADE
Journal of Indonesian Applied Economics, 2023
The essay aims to critically examine different theories proposed in the literature on international trade. Design/methodology/approach The essay is based on theoretical literature on the theories of international trade and working policies behind modern world trade globally Findings The essay discusses traditional international trade theories, mercantilist patterns, simplified models, new trade theories, strategic trade policies by advanced countries, FDI and technology role, and trade's impact on growth. It also discusses 21st-century theories, advocating for models that incorporate income inequality, political strategies, and real-world factors, and calls for models that incorporate income inequality and other real-world factors. Research limitations/implications The essay deals with only theoretical literature on international trade theories and policies. Findings and interpretation are subject to the theoretical development of international trade Originality/value The essay provided a critical explanation of international trade theories and tried to explain the paradigm shift in the theoretical framework of international trade.
Changing Paradigm in Trade Theories: A Review and Future Research Agenda
Indian Journal of Science and Technology, 2016
Objectives: The objectives of the study were to understand the evolution of trade theories and their application across nations over a period of time and to provide future direction of research for international trade. Methods/Statistical Analysis: To meet the objectives, the study undertook a comprehensive review of literature to bring together works of different researchers in the area of international trade. It summarizes the past theories and applications with the research advancements over the years. Findings: The study finds that over the years, research in international trade has evolved with new forms of models coming into existence. Many trade theories like absolute advantage, comparative advantage, factor endowment, factor price equalization, gravity model etc. have emerged and applied. At the same time, the trade environment across the developed and developing countries has metamorphosed with the advent of World Trade Organization and multiple trade blocs. Several factors have significantly gained importance, thus leading to a need of new dimensions in trade research. Conclusion/Improvements: The study proposes development of trade models which could incorporate pace of technological development and innovation, economic shocks like financial crisis, Brexit etc. and changes in global value chains. It also highlights the importance of future research in trade in services.
First version October 1 999 ) Trade Theory and Trade Facts
2001
This paper quantitatively tests the “new trade theory” based on product differentiation, increasing returns, and imperfect competition. We employ a standard model, which allows both changes in the distribution of income among industrialized countries, emphasized by Helpman and Krugman (1985), and nonhomothetic preferences, emphasized by Markusen (1986), to effect trade directions and volumes. In addition, we generalize the model to allow changes in relative prices to have large effects. We test the model by calibrating it to 1990 data and then “backcasting” to 1961 to see what changes in crucial variables between 1961 and 1990 are predicted by the theory. The results show that, although the model is capable of explaining much of the increased concentration of trade among industrialized countries, it is not capable of explaining the enormous increase in the ratio of trade to income. Our analysis suggests that it is policy changes, rather than the elements emphasized in the new trade ...
A FORMAL NOTE ON NEW THEORIES OF INTERNATIONAL TRADE AND DEVELOPMENT
Drawing upon the long-run solutions to a number of models in which there are economies of scale and differing degrees of intra-sectoral competition, conditions are found under which an industry's development will spread to further countries and under which the domestic industry should be supported by state intervention. 0 1996 by
International trade theory provides explanations for the pattern of international trade and the distribution of the gains from trade. The theory convinces most economists of the benefits of liberal trade. But many noneconomists oppose liberal trade. Opponents include some who may have encountered trade theory but nevertheless fall prey to fallacious reasoning. This essay attempts to convey why trade theory is so persuasive to economists and also to deal with why many non-economists are not persuaded.
A Neo-Heckscher-Ohlin Model of Trade with Endogenous Production Patterns*
Economic Record, 2005
We propose a Neo-Heckscher-Ohlin (HO) model of trade that combines comparative endowment advantage, comparative technological advantage, international capital mobility and trade costs. Using an inframarginal approach, we produce a partition of the exogenous parameter space in a host of parameter value subsets that demarcate the various equilibrium patterns of production and trade. The results are startling! They suggest that production within the diversification cone -a key assumption of the Heckscher-Ohlin theory that is required for its core propositions (such as factor price equalisation) to hold -may only prevail on the razor's edge, or under exceptional circumstances. In addition, our findings nominate a mechanism by which improvements in transaction efficiency facilitate international trade thereby stimulating cross-country division of labour. Contrary to other generalisations of the Heckscher-Ohlin (such as the various derivatives of the Kemp-Jones model of trade), our model does not assume a purely Ricardian character: comparative endowment advantage may determine the pattern of trade even in the presence of opposing technological differences, as long as total factor productivity coefficients adjusted for transaction efficiency and factor intensity do not confer unambiguous comparative (technological) advantage. Still, 'intensity-efficiency'-adjusted comparative technological advantage supersedes factor endowments in determining the flow of trade. * We, Tombazos and Zhang, would like to dedicate this paper to our dear friend and colleague Xiaokai Yang who died in mid-2004. It is with a heavy heart that we acknowledge this contribution as one of our last co-authored papers with Xiaokai. This research has benefited considerably from discussions with Alan Deardorff, Peter Neary and Hugo Sonnenschein whom we also thank, together with Ron Jones, Murray Kemp, Ed Ray, Don Wright and an anonymous referee for very constructive suggestions on earlier drafts of this
The Impact of International Trade on Economic Growth*
2016
In this paper, we examine the studies, since Adam Smith, on the impact of commercial and technological aspects, resulting from international trade, on the physical accumulation and quality of productive factors. We remark that the theory of economic growth and the theory of international trade, during the ‘classic period’, constituted two inseparable branches of economics. In this epoch, it was believed that international trade has a positive effect on the economic growth. Later, during the ‘neoclassic period’, these two theories of the economic thought became autonomus relatively to each other. Consequently, the importance of international trade was neglected in the context of economic growth, espe ially until the 1960’s. Recently, with the introduction of models of endogenous growth, both theories have merged again. The modelling frameworks advanced by the new models, as well as the recent developments inside the international trade theory, has allowed us to obtain a better unders...