Essay Title: 

With the help of the Ricardian trade model, critically evaluate the following statement:`Trade exploits a country and makes it worse off if its workers receive much lower wages than workers in other nations.` Krugman and Obstfeld (2003), Internaitonal Eco

April 3, 2016 | Author: | Posted in economics, mathematics and economics

TRADE EXPLOITS A COUNTRY AND MAKES IT WORSE OFF IF ITS WORKERS RECEIVE MUCH LOWER WAGES THAN WORKERS IN OTHER NATIONS (2007

INTRODUCTION

The open trade doctrine that allows a country to operate a free trade economy where it can trade with business operators from other countries and , also allow them to invest and trade in her economy , this practice has liberalize the international trade system and make the world a global village . The neo-liberalists views in international trade has always supported a globalize and open market in which every countries [banner_entry_middle]

is expected to open up its market and imbibe the culture of free trade , free economy entry and exit of labor and the opening of the state economy to the international market for active competition Neolibrals have fostered the movement to freer trade and deregulation of labor markets , arguing that overcoming the constant of limited markets is the means to increase growth , remedy trade imbalances , and lower unemployment . The state needs to be forced to comply with the laws of the market ‘ Samuelson (2004 . To a great extend the neo-liberalist doctrine has gone a long way in influencing how political decisions are made regarding public policies on trade and workers-labor relationship The minimum wage paid to workers in other country most times is a basis for labor union leaders in poorly remunerated economy to rise up protest for wage increment . The workers knowing the implication of low pay compared to their counterpart , how this would reduce their economic purchasing power . This factor spurs workers and makes them agitate for pay raise

Thus , this write-up would look at how trade exploits a country and makes it worse off if its workers receive much lower wages than what workers in other nations receive

RICARDO ‘S VIEW ON INTERNATIONAL TRADE

The law of comparative advantage advocated by David Ricardo came into limelight in 1816 . This law has it that in the international trade arena , a country with the lest cost of production of a goods and the most comparative cost advantage , compared to other countries , should be specialize in the production of such goods . The law of comparative advantage is based on the efficient production of goods and the adequate maximization of cost advantage in the production of these goods to the advantage of the country and the global trade . Thus , it is assumed ceteris paribus when two countries `X `Y ‘ produce 2 goods `A `B if country X has more comparative advantage in the production of commodity A and country Y has more comparative advantage in producing commodity B , then each should specialize in the production of each of these product in which they have more comparative advantage to the other country

The Ricardo ‘s theory assumes that technology is immobile and therefore a country that is expertise in a specific technology enjoys great comparative advantage in technological production to other countries with less technological development . The model ‘s Ricardian structure also allows for a simple examination of the gains… [banner_entry_footer]

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