Trade Theory

Brian McDonald

Chapter 2 in The World Trading System, 1998, pp 18-22 from Palgrave Macmillan

Abstract: Abstract The old doctrine of free trade was based on David Ricardo’s nineteenth century theory of comparative advantage, whereby countries produced what they were best at producing, and by trading with others they were better off than if all countries sought to produce everything they needed. For example a country with abundant land and a good climate produced agricultural goods, and a capital-rich country with abundant coal and steel produced industrial goods. By trading with each other both stood to gain, and this should occur even if one country was better at both activities: specialisation brought benefits.

Keywords: Free Trade; Comparative Advantage; Imperfect Competition; Trade Theory; Intraindustry Trade (search for similar items in EconPapers)
Date: 1998
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DOI: 10.1057/9780230379701_2

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