Trade Openness And Economic Growth Case Study
An enormous amount of researches and studies have been made on the specific relationship between trade openness and economic growth. The world environment of trade of products, goods and services is considered as one of the main reason of economic growth of economies today. The research of a significant and positive or negative relationship between trade openness and economic growth in the actual context seems to be a prerequisite to better understand globalization.
To better understand the nexus of this relationship and on what factors and variables does this relationship between trade openness and growth vary, the first part of this essay will give an overview of the existing theory on the subject, through a strong theoretical literature. The second part will give a critical analysis of the existing empirical studies realised by authors and economist all around the world. When the theoretical part will only give an interpretation of the phenomenon the empirical section will allow a better and more accurate understanding of the relationship.
Theory Section
Adam Smith, a British economist, first mentioned the idea that a country has an absolute advantage in the production of a good if that good is produced more efficiently, in other words, with less labour than another country. In his …show more content…
In his Theory of Comparative advantage (1817), Ricardo stated that economies will gain from specialising in those goods they can produce more efficiently, cheaply, than other economies, and exported those goods, in return for imported goods that they are less efficient at producing compared to other economies; which would therefore represent a gain from trade for both countries implied. Moreover the main hypothesis we have from Ricardo’s theory is that trade openness would decrease costs of production and so forth increase incomes, thus promotes economic
To better understand the nexus of this relationship and on what factors and variables does this relationship between trade openness and growth vary, the first part of this essay will give an overview of the existing theory on the subject, through a strong theoretical literature. The second part will give a critical analysis of the existing empirical studies realised by authors and economist all around the world. When the theoretical part will only give an interpretation of the phenomenon the empirical section will allow a better and more accurate understanding of the relationship.
Theory Section
Adam Smith, a British economist, first mentioned the idea that a country has an absolute advantage in the production of a good if that good is produced more efficiently, in other words, with less labour than another country. In his …show more content…
In his Theory of Comparative advantage (1817), Ricardo stated that economies will gain from specialising in those goods they can produce more efficiently, cheaply, than other economies, and exported those goods, in return for imported goods that they are less efficient at producing compared to other economies; which would therefore represent a gain from trade for both countries implied. Moreover the main hypothesis we have from Ricardo’s theory is that trade openness would decrease costs of production and so forth increase incomes, thus promotes economic