Globalisation, Comparative Advantage and the Changing Dynamics of Trade

image of Globalisation, Comparative Advantage and the Changing Dynamics of Trade

The effects of globalisation have been at the forefront of public debate in recent years, fuelled on the one hand by the large benefits of integrated markets, and on the other hand, by the detrimental adjustment effects often experienced by many economies as a result.  Knowing how trade has been evolving over time and the role policy has played in this evolution are critical to understanding the globalisation debate and grasping the lessons for future policy development. The comparative advantage hypothesis has been suggested as one of the principal explanations of international trade and of the benefits associated with openness. It has also provided the intellectual underpinnings for most trade policy in the past 50 years. This book collects OECD work that builds on recent contributions to the theory and empirics of comparative advantage, putting particular emphasis on the role policy can play in shaping trade.


Comparative advantage and structural change

Toward a complementary policy regime

This chapter outlines a pragmatic framework for the structural policies needed to complement trade liberalization within the context of comparative advantage. Its recommendations are eclectic — ranging from efforts to identify key areas of market failure to policy experiments and the analysis of successful past experiences in developing institutions and infrastructure. The goal is to strengthen an economy’s ability to maximise benefits attendant from specialising in comparative advantage industries, while providing support to facilitate structural adjustment and ensure that the benefits from structural change are widely shared. The tools recommended are in turn based on strategies that can be (and often have been) implemented by governments subject to the usual political, informational and capacity constraints.


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