Why is it difficult to measure the benefits of international trade?
Read the entire chapter (available through the course reserves). Answer these questions with information from the Irwin chapter.
1. Compare Adam Smith and David Ricardo’s conclusions on the direction of trade.
2. How does foreign competition affect prices from our model in class? Is this consistent with the empirical results?
3. Why is it difficult to measure the benefits of international trade? Briefly summarize a natural experiment used to estimate the gains from trade.
4. Briefly explain two ways international trade affects productivity growth.
5. Briefly summarize an example of trade and the environment you find surprising.