Reflections on the Validity of Traditional Trade Theory
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Publication date: 2014-02-28
GNPJE 2014;269(1):73-95
The article aims to either confirm or invalidate a claim by some researchers that world trade is again governed by the “classically interpreted” comparative advantage, which diminishes the importance of new theoretical approaches while restoring the validity of the traditional trade theory. The author uses a deductive approach to conduct an in‐depth critical literature review, drawing on results presented in reviewed journals and reports by international organizations. The starting point for the reasoning is a diagnosis of contemporary trends in world trade, with an increasing role of developing economies and hi‐tech manufactured products. Stylized facts derived from an analysis of WTO and UNCTAD statistics as well as the results of different empirical studies are confronted with the guidelines of the traditional trade theory. The author finds that neither intensified exports by developing countries nor changes in the structure of trade, let alone productivity growth in these economies, are in line with the postulates of the traditional trade theory. Further development is needed of theoretical models aimed at explaining trends in today’s global trade as well as efforts to improve the quality of statistics, the author says.
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