Ricardo Meets China, India and U.S. Three Hundred Years Later

Abstract

As our trading world becomes more globalized, who benefits and who gets hurt? This paper relies on the Ricardian model to explore the effects of technological improvements in underdeveloped countries on the welfare of developed countries. For example, trading between the United States and China, which has undergone a technological improvement in commodities which China imports and exports, may lead to different welfare implications for both countries. The paper models several scenarios to indicate and demonstrate the arguments for and against globalization. The findings suggest that certain policies should be implemented to maintain and enhance the competitiveness of developed countries.

Keywords: International trade; Ricardian Model; Samuelson; Gainers and losers from trade; East-West trade; North-South trade; China; India; United States; Outsourcing

JEL Classification: F0, F1, O, O1, O3, D51