Theories of International Trade
The present chapter explains the theoretical basis of international trade. The focus, in particular, is to:
- Explain the various theories of international trade, ranging from the mercantilist version to classical theories of absolute and comparative cost advantage, the factor endowment theory, neo-factor proportions theory, country similarity theory, intra-industry trade, trade in intermediate products and services, and finally, Porter’s theory of national competitive advantage.
- Discuss the static and dynamic gains from trade.
- Explain terms of trade and their various forms.