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ECO 122 (International Economics) Lecture Ms. Marissa Maricosa A. Paderon Assistant Professor, Economics Department Ateneo de Manila University
The Narrow and Broad Arguments for Free Trade by Paul Krugman
The Narrow Economic Argument for Free Trade (theory of domestic distortions) by Jagdish Bhagwati (1971)
Example: distortion (wage differential between unionized & nonunionized industries)
1st best policy: wage subsidy 2nd best policy: production subsidy 3rd best policy: trade policy
The Narrow and Broad Arguments for Free Trade by Paul Krugman
Broad (political-economy) Argument for Free Trade Paul Krugman (1993). Free trade is a pretty good, if not, perfect policy. While an effort to deviate from it in a sophisticated way will probably end up doing more harm than good.
Outward- and inward-oriented industrialization Outward orientation means providing similar incentives to production for domestic & export markets. Inward orientation means biased production for domestic rather than export markets.
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