Assignment Question: (3500 words essay - excluding references, tables, etc.
QS. Critically examine the Ricardian trade theory. (You may support your discussion with empirical
evidence)
Critically: weigh arguments for & against using (specified) criteria, assess the strength of
argument/evidence
Examine: investigate or inquire into in detail; critically evaluate
MAKE SURE TO FOLLOW the above essential techniques to fully tackle the question…
In addition, please describe what is trade? And use case studies to support your arguments.
** Please make sure that you position the narrative well in the appropriate literature and are critically
analytical. It would be a good idea to develop hypotheses and provide evidence from one or more
countries that either supports or rejects these hypotheses. Very important to organize thoughts and
ideas in a way that flows as the essay is read **
General requests throughout the essay:
- Use 12pt size, with 1.5 spacing
- Structure is extremely important, i.e. the flow of ideas and thoughts as the essay is read
- Always use evidence to support your arguments
- Try including the models and relate to your arguments
- Please use FULL Harvard style referencing and quote the original source not web articles
KEY questions to course (MUST be highlighted throughout essay if applicable to topic being answered)
Why do countries trade?
How do different theories explain trade among countries?
What instruments available for trade policy?
What are the costs and benefits of free trade and protection?
Is trade an important stimulus for growth and development?
What are the effects of trade on income inequality? Who gains and who loses from trade?
Can government policies affect a country’s comparative advantage?
What is the meaning of absolute advantage? Under what circumstance does a country have
absolute advantage in the standard model?
What is the meaning of comparative advantage? Under what circumstance does a country
have comparative advantage in the standard model?
What is a production Possibility Frontier? Why is it linear (a straight line) in the Ricardian
model under the assumption of constant costs?
Below some information I noted throughout lectures (PLEASE USE):
A. Trade Theories include:
Classical Theories
o Mercantilism (1500s-1800s)
o Absolute Advantage (Adam smith, 1776)
o Comparative Advantage (David Ricardo, 1817)
Modern Theories
o Factor-Proportions Theory (Heckcsher-Ohlin, 1930s)
o International Product Life Cycle (1960s)
Recent Structuralist Theories
o Strategic Trade Theory (Paul Krugman, 1970s-1980s)
o The Porter Diamond Model, National Competitive advantage (1990s)
B. Main conclusions from Absolute and Comparative Advantage Theories:
Potential world production is greater with unrestricted than with restricted trade
All countries gain from free trade
C. Assumptions of the Ricardian Model
D. Is the Ricardian model supported empirically?
McDougall, 1951 – Stern, 1962 – Balassa, 1963 – etc.
E. Why specialization in real world is not as extreme as Ricardian model suggests?
The existence of more than one factor of production.
Protectionist policies
Transport costs. Sometimes these are sufficiently high so as to lead countries into
production in industries in which they do not have comparative advantage
F. Key words:
Mercantilism
Constant Returns to Scale (CRS)
Absolute Advantage
Comparative Advantage
Opportunity Cost
Production Possibility Frontier (PPF)
Course Description:
The aim of the course is to provide analytical techniques to gain insight into international trade theory,
trade policy tools and their implications for growth and development. Upon the completion of this
course students will have a good understanding of trade theories, international trade policies, and their
consequences on many issues in developing countries. The first half of the course will provide an
in-depth analysis of main trade theories. This section aims to equip students with the skills to use trade
theories to understand the impact of different trade policies and economic factors on economy. The
second half of the course will focus on the practical aspects of the in international trade, and the effect
of different trade policies on economic growth and development.
On successful completion of this unit students will:
be expected to demonstrate a good understanding of the main trade models, their assumptions,
implications, and applications in real world issues
be expected to use trade theories to provide an analytical discussion of a trade policy
develop an understanding of the underlying causes of various trade policies in both developed
and developing countries from both economic and political perspective
develop a critical understanding of the role of trade flows in promoting economic growth and
economic development
be able to engage in a critical discussion of the relationship between international trade and
development
be expected to discuss the limits of trade policies
gain experience in presenting and discussing an argument using theoretical and empirical studies
KEY Readings:
Krugman, P. R. and Obstfeld, M., "International Economics, Theory and Policy," 9th Edition,
Pearson-Prentice Hall, 2012.
Pugel, Thomas, International Economics, 12th edition, McGraw-Hill-Irwin, 2004.
Ruffin, Roy J. (2002) ‘David Ricardo’s Discovery of Comparative Advantage’, History of Political
Economy
Fourie, Johan (2009) Evaluating Africa’s comparative advantage in travel service exports,
Mimeo, Department of Economics, Stellenbosch University
Todaro, M.P., Smith, S.C., “Economic Development,” 11th Edition, Prentice Hall, 2012.
Begg, David, Fischer, Stanley, Dornbusch, Rudiger “ Economics”, 7th Ed.
Economic Development and International Trade / Greenaway, D (Ed), Book , 1988
Dunkley, G., “Free Trade: Myths, Reality and Alternatives,” London : Zed Books, 2004. - ISBN
1-85649-863-8
Cole, M., 2000, “Trade Liberalisation, Economic Growth and the Environment,” Cheltenham:
Edward Elgar, ISBN 1-84064-176-2
Buffie, E., 2001, “Trade Policy in Developing Countries” / Cambridge University Press, - ISBN
0-521-00426-8
McCulloch, N; Winters, A; Cicera, X., 2001, “Trade Liberalization and Poverty: A Handbook,”
London : Centre for Economic Policy Research, ISBN 1-898128-62-6
Sen, Kunal, “Trade Policy, Inequality and Performance in Indian Manufacturing”, Routledge, UK,
2009
Winters, L. Alan, Neil Mcculloch, And Andrew Mckay, 2004, Trade Liberalization and Poverty:
The Evidence So Far, Journal of Economic Literature, vol. XLII (March 2004) pp. 72–115
Trade and Development Report UNCTAD. This report is published annually and available online.
Hoekman, B; Mattoo, A, 2002, “Development, Trade and the WTO: A Handbook,” World Bank
2002, Washington-ISBN 0-8213-4997-X
The Development Dimensions of Trade / OECD, 2001. - ISBN 92-64-19675-7
Toye, J., 2003, “Trade and Development: Directions for the 21st Century, ” Cheltenham : Edward
Elgar, 2003. - ISBN 1-84376-044-4
Chang, H-J; Green, D., 2003, “The Northern WTO Agenda on Investment: Do as we say, not as
we did,” Geneva : South Centre/ CAFOD, 2003
Additional Readings:
Industrial and Trade Policy Reform in Developing Countries / Adhikari, R Et Al. (Eds.), 1992
Trade and the Poor: The Impact of International Trade on Developing Countries / Madeley, J,
1996
Begg, David, Fischer, Stanley, Dornbusch, Rudiger “ Economics”, 7th Ed.
International Trade and the Environment: Theory and Policy Issues / Heerink, N.B.M. Et Al., 1993
WTO, Liberalisation and Industrial Sector: The Case of Market Access / Mehta, R. -New Delhi :
Research and Information System for the Non-aligned and Other Developing Countries, 2001. -
ISBN 81-7122-084-3
Some Suggestions for Improvements in the WTO Agreements / Lal Das, B. - book . -Penang,
Malaysia : Third World Network, 1999. - ISBN 983-9747-34-7
The WTO Agreements: Deficiencies, Imbalances and Required Changes / Lal Das, B . - book .
-Penang, Malaysia : Third World Network, 1998. - ISBN 983-9747-25-8
Options for Implementing the Trips Agreement in Developing Countries: Report of an Expert
Group on the Trips Agreement and Developing Countries / Third World Network. - book : Third
World Network, 1998. - ISBN 983-9747-33-9
Recommended Online Material:
International Economics Study Center by Steven Suranovic:
http://internationalecon.com/index.php
Paul Krugman’s Blog:
http://krugman.blogs.nytimes.com/
Dani Rodrik’s Blog:
http://rodrik.typepad.com/
