Trade and Development

 Benefits of Trade
o Both countries gain from trade whenever relative prices of such commodities differ
in each country in the adsence of trade
 Winners/Losers
o Comparative advantage is more on the efficiendy of trade
o Distributional consequences of trade
o Each country can gain from trade but not necessarily all groups within the countrym
gain from trade
o AGGREGATE GAINS OUTWEIGH THE LOSSES
o HECKSHER-OLIN MODEL
 If a nation’s comparative advantage lies in the factor that the countru is
abundant in, that factor gains; less abundant factor losses