Classical Trade Theory
- Theories
- Economic Theory
- International trade
- What is international trade
- Mercantalism
- Classical Trade Theory
- Absolute Advantage Theory
- What is the Comparative Advantage Theory?
- Factor Proportion Theory
- Heckscher-Ohlin theory
- Product Life Cycle Theory
- Theories of Outsourcing
- What is the Theories of Outsourcing?
- What is the Transaction Cost Economics Theory?
- What is the Agency Theory?
- What is the Knowledge based theory?
- What is the Self-regulation Theory?
- What is the Social cognitive theory?
- What is the Leader-Member Exchange Theory?
- Technology adoption Theories
What is theory of the Classical trade ?
The magnitude of a country’s imports and exports greatly depends on its patterns of trade with other nations. Thus if they have an upper hand in the production of raw materials, they will excel in the manufacture of such goods.
Thus a nation can generate products for its own use by its citizens and also export the extra to the other countries. Therefore it is appropriate for the nations to buy goods over which they possess an economic disadvantage.
Economic upper hand or disadvantages may happen for a nation because of dissimilarities in factors like reserves, money, labour, skill or entrepreneurship (Morgan and Katsikeas, 1997). But this theory only offers a general idea of what international trade is but it cannot provide answers for what is the underlying cause of such comparative advantages.
References:
Geoffrey, L & Inger, W 1984, ‘A Product Life Cycle Theory for International Trade: An Empirical Investigation’, European Journal of Marketing, vol. 18, no.7, p. 72.International Trade Theories. Viewed 22 March 2010, <http://www.essays.cc/free_essays/b5/lvt197.shtml>
Hecksher, E & Ohlin, B 1933, Interregional and International Trade, Harvard University Press, Cambridge, MA.
Leontief, W 1966, Input-output Economics, Oxford University Press, Oxford.