International Trade and Uneven Gains: What Do Theory and Structure of India’s Foreign Trade Tell Us?

Rajat Acharyya () and Shrimoyee Ganguly ()
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Rajat Acharyya: Jadavpur University
Shrimoyee Ganguly: BIT Mesra

Chapter Chapter 21 in 75 Years of Growth, Development and Productivity in India, 2025, pp 683-720 from Springer

Abstract: Abstract The Gains from Trade theorem, based on the Ricardian doctrine of comparative advantage, constitutes one of the core propositions in international trade theory. But while it postulates that the trading nations will experience welfare gains at the aggregate when they specialize according to their comparative advantage, it does not suggest that all economic agents within a trading nation will gain. This chapter reviews the theoretical discourses and country experiences regarding such uneven gains from trade that have been pushing policy makers towards trade-policy reversals and raising concerns for future of globalization. We build an analytical model of politically optimum trade liberalization based on inequality driven discontents regarding trade liberalization to show that the politically optimum choice of tariff rate is larger than economic optimum rates. Finally, we review India’s trade-policy paradigm before and after the 1991 Crisis, and discuss changing structure and increasing skill composition of our exports as potential sources of uneven gains and income inequality.

Keywords: Uneven gains; Wage inequality; Globalization discontents; Skill composition of exports; GVC trade; F11; F14; F16 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:spr:isbchp:978-981-97-8054-9_21

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DOI: 10.1007/978-981-97-8054-9_21

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