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Chapter 7

Political Science Chapter 7 Summary.docx

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Political Science
POLI 243
Mark Brawley

Chapter 7: The Politics of Trade The Reasons for Conducting Trade: Comparative Advantage - Comparative advantage: free trade is mutually beneficial ; actor’s ability to produce a good or service more efficiently than another actor’s - It can shift all resources to producing a good it’s good at producing, if everyone does the same more of each good gets produced at lower cost and more goods to go around, overall consumption increases and everyone benefits - Specialization and division of labour are used - Autarky: country with closed borders who are restricted only to items within their border - PPF—production possibility frontier—limit on how much it can produce - Specialization: leads to result in maximum production possible out of nay combination of production mixes - Comparative advantage: when one country can produce an item at a lower cost in terms of opportunities forgone than can the other country - Absolute advantage: when country can use fewer resources to produce a product than the other country The Consequences of Specialization - Trade based on comparative advantage recommends countries focusing their production on goods they can produce more efficiently compared to other countries - According to Marx, some states enter into international division of labour and get frozen in place, unable to escape economic role in which they are initially cast - Realist criticism: each state wants more money than neighbour not more money than past - Realists say: states want trading partners to have free trade while they have protectionist policies The Domestic Impact of Trade - The Heckscher-Ohlin model (H-O model)—country can be assessed in terms of its endowments of inputs (factors of production); capital-abundant country produces things that require more capital, labour-abundant country produces goods that require more labour - Imports are goods whose production required intensive use of locally scarce factor of production - H-O Model: 1.) Country’s endowments of factors of production determine its exports and imports 2.) The results hold when # of factors of production or # of goods is increased 3.) Model is elaboration on theory of comparative advantage - H-O model doesn’t say who within country receives the benefits - Stolper-Samuelson: argued relatively scarce factor of production won’t gain as much as those with the abundant factor of production - Stolper-Samuelson Theorem: 1.) Holders of scarce factor of production oppose trade liberalization; holders of abundant factors gain from trade expansion 2.) Trade increases gains for country as a whole but specialization entailed redistributed income within country - Rogowski: changes in level of trade sharpen definition of economic interests which in turn bring new political alliances int
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