Specialization (Comparative Advantage and Factor Endowments)

INTRODUCTION

"The result of this process of global economic integration means that today virtually all nations are part of a global economy characterized by:

    • Specialization: Particular locations specialize in the production of distinct goods.

    • International trade: These goods are then exchanged with other locations specializing in other goods.

Specialization entails trade because by producing a narrower range of goods and services than you use, you must engage in trade to acquire the ones you do not produce. International trade is the outcome of specialization among countries... The renewed growth of global integration following the collapse of the Soviet Union and the opening up of China to trade from the early 1990s has been accompanied by rising inequality in many high-income countries, along with geographically concentrated job losses in labour markets affected by imports from China. For these particular displaced workers it was not much reassurance to know that a new equilibrium would eventually be reached in which workers would on average be better off." (Core Econ, Chapter 18). In today's class we will consider the economic impact of specialization and trade on economic development.

HOMEWORK DUE TODAY

You should have read the following sections in Chapter 18 ("The Nation and the World Economy") of Core Econ: 18.4 Specialization and the Gains from Trade Among Nations and 18.5 Specialization, Factor Endowments, and Trade Between Countries.

ASSESSMENTS AND ACTIVITIES

  1. Write a blog post about the sections you read for homework, relating the ideas in the reading to the country you have chosen to study.

  2. Share a question that you would like to discuss as part of our Socratic Discussion today.

    1. Participate in a Socratic Discussion. This rubric will be used to evaluate your blog post and discussion.

WORK DUE NEXT CLASS

Read the following sections in Chapter 18 ("The Nation and the World Economy") of Core Econ: 18.6 Winners and Losers from Trade and Specialization and 18.7 Winners and Losers in the Very Long Run and Along the Way.

EXTENSION RESOURCES

  1. Book: On the Principles of Political Economy and Taxation by David Ricardo

  2. Book: Robert Heilbroner (The Worldly Philosophers) on David Ricardo

  3. Podcast: In this podcast, Nobel Laureate in Economics Angus Deaton of Princeton University talks with EconTalk host Russ Roberts about the economics of trade and aid. Deaton wonders if economists should re-think the widely-held view that redistribution from rich nations to poor nations makes the world a better place. The conversation focuses on the challenges facing poor Americans including the rising mortality rate for white Americans ages 45-54.