International Trade and Comparative Advantage

Workers move from the less productive sector to the more productive one.

Complete specialization is unrealistic because countries often produce multiple goods rather than focusing solely on one.

The model can be applied under simple assumptions such as constant marginal costs and comparative advantage.

<p>The assumptions are contested with domestic distortions, increasing returns, and complex external factors.</p> Signup and view all the answers

<p>Comparative advantage is crucial as it underpins the potential gains from trade between countries.</p> Signup and view all the answers

<p>The main distinction is that bilateral trade lowers the probability of war between two countries, while multilateral trade openness increases the likelihood of bilateral conflicts.</p> Signup and view all the answers

<p>Multilateral trade liberalization reduces the degree of bilateral inter-dependence between countries.</p> Signup and view all the answers

<p>War increases bilateral trade costs more than multilateral trade costs, thereby reducing trade exchanges.</p> Signup and view all the answers

<p>The prediction tested was that globalization decreases the probability of global conflicts but increases the likelihood of bilateral conflicts.</p> Signup and view all the answers

<p>The researchers utilized the Correlates of War project database to analyze the occurrence of militarized interstate disputes (MIDs).</p> Signup and view all the answers

<p>Income inequality persists due to the lack of perfect equalization of the returns to factors of production, despite trade being beneficial compared to autarky.</p> Signup and view all the answers

<p>The main principle is that countries should specialize in producing goods and services where they have a relative efficiency, rather than competing against each other on all fronts.</p> Signup and view all the answers

<p>Misconceptions include the belief that a nation gains from trade only if its firms are more competitive, that foreign competition is unfair due to low wages, and that trade exploits countries with lower worker wages.</p> Signup and view all the answers

<p>Specialization is determined by local endowments of production factors, technologies, production methods, economies of scale, and barriers to circulation of goods and services.</p> Signup and view all the answers

<p>The WTO facilitates trade by creating agreements to reduce tariffs and taxes in a predictable way, acting as a cornerstone of the post-war liberal order.</p> Signup and view all the answers

<p>$1/3$</p> Signup and view all the answers

<p>Foreign</p> Signup and view all the answers

<p>Wages become higher in the industry with a comparative advantage.</p> Signup and view all the answers

<p>Relative prices equalize to a level between the autarky prices.</p> Signup and view all the answers

<p>It allows for greater overall production and efficiency.</p> Signup and view all the answers

<p>Home is relatively less efficient in cheese than Foreign.</p> Signup and view all the answers

<p>$2$</p> Signup and view all the answers

<p>Foreign is relatively more productive in wine.</p> Signup and view all the answers

<p>Access to better technology and cost advantages.</p> Signup and view all the answers

<p>Economic interdependence focuses on actual interconnections in production processes, while the liberal hypothesis centers on mutual benefits from exchanging final products.</p> Signup and view all the answers

<p>A GVC is a series of stages in producing a product or service sold to consumers, with stages produced in at least two different countries.</p> Signup and view all the answers

<p>Foreign value added is crucial as it indicates the extent to which a firm incorporates global resources in its production process.</p> Signup and view all the answers

<p>Spider-like structures and snake-like structures.</p> Signup and view all the answers

<p>A company must decide what production stages to 'make' in-house and what to 'buy' from abroad.</p> Signup and view all the answers

<p>A positive cross-country correlation is expected between the stock of inward FDI and GVC participation.</p> Signup and view all the answers

<p>'Carry-along trade' does not contribute significantly to GVCs as it does not involve genuine production stages.</p> Signup and view all the answers

<p>Endogeneity refers to the situation where the effect of an independent variable on a dependent variable is not clearly interpretable due to the presence of omitted variables that cause bias in the estimates.</p> Signup and view all the answers

<p>Omitted variables can lead to biased estimates, making it difficult to establish a clear causal relationship between trade and war outcomes.</p> Signup and view all the answers

<p>Self-selection implies that countries choose whether to engage in trade or conflict based on certain criteria, which complicates the analysis of their interactions.</p> Signup and view all the answers

<p>Early empirical studies generally found that trade inhibits political conflicts, supporting the liberal hypothesis.</p> Signup and view all the answers

<p>Barbieri found that when accounting for trade asymmetries and national vulnerabilities, interdependence is positively related to dyadic conflict, opposing the liberal hypothesis.</p> Signup and view all the answers

<p>Including observable third factors helps to clarify the relationship between trade and peace by controlling for other influencing variables.</p> Signup and view all the answers

<p>The infrequent observation of wars and military conflicts poses challenges for empirical studies, as it limits the data available for analysis and biases the results of conflict prevalence.</p> Signup and view all the answers

<p>Thoenig's work suggests that the lack of clear evidence supporting the liberal hypothesis may stem from the complexities and variability of the relationships between trade and conflict.</p> Signup and view all the answers