Final Exam Question Answers-1

Final Exam Question Answers-1 - Final Exam Question Answers...

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Final Exam Question Answers: 1) Is globalization/growth good for the poor In 1995, Sachs and Warner conducted an analysis of world economies. They found that growth was substantially higher in open economies than in economies more hostile to trade. They also observed that countries with open economies were, in fact, experiencing convergence. It is also worthy of note that the smaller the country, the greater the benefits provided it by trade. In 2001, David Dollar and Aart Kraay found that income distribution within a country is unaffected by trade. Thus, the poor maintain their share of income and benefit from a share of the growth from trade. In other words, all benefit from the growth proportionally. So, yes, the poor benefit from the growth resulting from increased global trade. 2) Exceptions to free trade The main exception to free trade is the protection of an “infant industry.” This arises market prices do not account for the full social benefit provided by the industry. These may include the training of workers or the development of infrastructure. This argument hinges on “dynamic learning effects,” the notion that an industry may achieve comparative advantage from learning-by-doing.
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