Difference Between The Dixit-Norman Approach

There is no doubt that increasing in international trade is supporting the economic growth across the world, raising incomes and creating jobs. However, international trade can also some create economic obstacles, such as the international context and the market policy and regulations of each country, and consequently it can be said that the effects would have positive and negative sides, and it is useful to mention all of them and to take them into consideration.

 Free Trade: David Ricardo (support free trade)   o Theory of comparative advantage: For two nations without input factor mobility,  specialisation and trade could result in increased total output and lower costs  than if each nation tried to produce in isolation.    Both nations can benefit from trade if each specialises in good that they  have the lowest opportunity cost, even if one economy is more efficient in  making everything.    However, Comparative advantage in not static, and changes over time in  reality.    Also, comparative advantage assumes that factors of production can’t  move between countries  therefore comparative advantage is set to be  outdated

insights which have been neglected by the later literature of new growth theory and new trade

There has been a dual view of trade since the time of the ancient Greeks. The two sides of these philosophers views are the recognition of the benefits of international exchange, but that there is concern that certain domestic industries would be harmed by foreign

However, it was apparent to economists that nations with similar resource endowments exchanged similar products with each other. Economists felt that trade explained solely by comparative advantage was an incomplete analysis of international trade. Furthermore, since the classical trade theory was unable to explain intraindustry trade, economists decided to expand on the classical trade theory by creating a new theory of trade (Carbaugh, 2011). The new theory states that economies of scale provide incentive for a country to specialize in a particular product (Carbaugh, 2011). Furthermore, based on economies of scale, nations with similar factor endowments will trade with each other as sometimes it is beneficial (Carbaugh, 2011). Arguments stemming from this new trade theory puts the economic case for free trade in doubt.

The spread of globalization forms an economic theory—in order to maximize the interests of each country, the interdependence among countries accelerates the flows of

The Solow Model, also known as the neoclassical growth model or exogenous growth model is a neoclassical attempt created in the mid twentieth century, to explain long run economic growth by examining productivity, technological progress, capital accumulation and population growth. This model was contributed to by the works of Robert Solow, in his essay ‘A Contribution to the Theory of Economic Growth’ and by Trevor Swan in his work, ‘Economic Growth and Capital Accumulation’, both published in 1956. The model is perceived to be an extension of the 1946 Harrod-Domar model, which Solow (1956) describes as a ‘model of long-run growth which

Firms then develop and are the main contributors towards the market. The strongest and most versatile firms will survive. Therefore, the size of firms brings down costs through economies of scale. (pg. 229) The axial division of labor of a capitalist world-economy splits production into core-like products and peripheral products. (pg. 229) The core-like products typically group themselves in few states and establish bulk of activity. Whereas, peripheral products are scattered among multiple states. The economic history of the modern-world system is full of changes and constant downgrades of products. (pg. 229) Producers seek to monitor costs to hold their share of the market. There is obliviously competition amongst producers engaged in production. However, they right each other without hesitation. (pg. 229) When an exchange occurs, competitive products are in a weak position and quasi-monopolized products are in a strong position. Unequal exchange results when a steady movement from the surplus value by producers of peripheral products moves to producers of core-like. (pg. 229) Methods such as unequal exchange move accumulated capital from politically weak regions to politically

Economic analysts say trading among other countries with no stipulations improve global efficiency in resource allocation (Tupy, 2005). Free Trade delivers goods and services to those who value them most and allows partners to gain from specializing in the producing those goods and services they do best; according to Tupy’s findings, Economists call that the law of comparative advantage. Tupy also states when producers create goods they are comparatively skilled at i.e. Germans producing beer and the French producing wine, those goods increase in abundance and quality. Trade allows consumers to benefit from more efficient production methods, for example, without large markets for goods and services, large production runs would not be economical. Large production runs, in turn, are instrumental to reducing product costs while lower production

The country can maximize their wealth by putting the resources in the most competitive industries. Government created comparative advantage rather than free trade because now easier moves the production processes and the machines into countries that can produce more goods (Yeager & Tuereck, 1984). However, many countries now move to new trade theory suggests the ability firms to limit the number of competitors associated with economic scale (reduction of costs with a large scale of output) (Krugman, 1992). The comparative advantage occurs when two-way trade in identical products, it will useful where economic scale is important, but it will create problem with this model. As a result, government must intervene in international trade for protection to domestic firms (Krugman, 1990)

The efficiency of resources allocation is improved by the free international trade, as the higher productivity and increasing in total domestic output of commodities and services are

Trade also leads to competition, a driving force in increasing the “pie.” Although competition with foreign producers might be perceived as a bad thing, it actually facilitates economic growth in the world. Competition forces producers to constantly update and improve their products. Without competition, a state becomes stagnant and simply stays at the status quo for years to come. Thus, competition helps the global economy evolve with new ideas and innovations. The instrumental role of competition and trade can be seen when comparing the fate of

Eyeballing any cross sectional data on growth across countries shows that countries grow at different rates. Many theories try to explain this phenomenon with emphasis with capital accumulation being one of them. I will start by developing the standard neoclassical growth model as developed by Solow(1956)[1]. I will then proceed to discuss the extensions that have been made to this basic model in an attempt to better understand actual growth figures, for e.g. the standard neoclassical model cannot explain the magnitude of international differences in growth rates. Mankiw[2] points out that “the model can explain

Zekos (2004) believes there are three main factors that push global economic growth. These are an improvement in technology regarding communication and transportation, individual taste has favoured taking advantage of declining costs and increasing economic integration and public policies influencing the pace of economic integration. With a global market, cultural homogenisation is free to happen whereby popular brands are made universally desired (Hollensen, 2010).

Globalization is a phenomenon, a world wide movement where nations and communities come together and form a network. Throughout the course we explored the integration and interdependence of various nations, which ultimately shapes world affairs on a global level.Evidently, growth of the developing countries is the main cause of globalization and it brings both opportunities and disadvantages to them.