Journal of International Political Economic - Myassignmenthelp.Com

Question: Discuss about the Journal of International Political Economic. Answer: International trade means the process of exchange among different countries. This exchange will be of capital, services or goods. Each trading partner enjoys mutual gains when they specialise in a particular good or service. Moreover, for this particular good or service, the country faces either comparative advantage (Laursen, 2015). In other words, a country will produce that product in which it has less opportunity costs. Hence, a country enjoys comparative advantage when it can produce a particular good or service with a lower cost compare to other countries. This theory is developed by David Ricardo. According to him, a countrys welfare can be increased by applying this concept. Comparative advantage is a changing process. It means that comparative advantage can change over time (Levchenko Zhang, 2016). Hence, it is important for a country to find out various sources of comparative advantage. Firstly, comparative advantage basically depends upon the quality and quantity of chief production factors. Some countries have huge amount labour force and some countries have huge amount of capital investment. Secondly, the chief reasons behind this comparative advantage are geography and climate (Costinot, Donaldson Smith, 2016). Due to these differences, some countries enjoy low level of production costs compare to other countries. Thirdly, a country can enjoy comparative advantage if it has developed infrastructure facility. The government can invest huge amount of money to develop transportation and communication service. This will further decrease the trade cost and will increase supply capacity (Schilke, 2014). Information and communication technology helps a country to enjoy comparative advantage in international trade by developing information oriented sector. There are some other important sources which are needed to analyse. Exchange rate fluctuation influences the relative prices of imports and exports. Moreover, it can increase or decrease the total demand of a product from domestic and foreign customers. On the other hand, governmental controls on import can be used to generate artificial comparative advantage for domestic producers of a country (Beverelli, Fiorini Hoekman, 2017). Some tools that government use to control imports are tariffs, quotas and export subsidies and so on. Moreover, increasing returns to scale of a company helps to raise its demand for any commodity. Increasing return happens when output increase more than its proportional. This increasing demand in market helps trade to take place. Therefore, increasing returns help a company to become specialised and to enjoy comparative advantage. It should also be mentioned that banking institutions are very important for a country to achieve comparative advantage (Rappop ort, Schnabl Stern, 2014). Developed banking sector helps different companies by granting loans and by providing export credits. Moreover, a good governmental body also helps companies by providing legal facilities. Hence, good institutions of a country help to increase comparative advantage. Lastly, product design and reliability, innovation and quality increase the level of competition for a producer. There are various countries that are now making comparative advantage to make knowledge industries and specific knowledge sector with high quality. There are some other self-reinforcing sources which help a country to increase comparative advantage. Hence, by developing any one of the above sources or all sources, a country can enjoy more comparative advantage (Schilke, 2014). As comparative advantage of a country can change over time, it is called a dynamic process. In conclusion it can be said that a country can enjoy comparative advantage for various reasons. However, this comparative advantage may change over time. Hence, it is important for a country to improve all sources for which it has comparative advantage. References: Beverelli, C., Fiorini, M., Hoekman, B. (2017). Services trade policy and manufacturing productivity: The role of institutions.Journal of International Economics,104, 166-182. Costinot, A., Donaldson, D., Smith, C. (2016). Evolving comparative advantage and the impact of climate change in agricultural markets: Evidence from 1.7 million fields around the world.Journal of Political Economy,124(1), 205-248. Laursen, K. (2015). Revealed comparative advantage and the alternatives as measures of international specialization.Eurasian Business Review,5(1), 99-115. Levchenko, A. A., Zhang, J. (2016). The evolution of comparative advantage: Measurement and welfare implications.Journal of Monetary Economics,78, 96-111. Rappoport, D. P. V., Schnabl, P., Stern, C. E. P. N. Y. U. (2014).Comparative advantage and specialization in bank lending. Discussion paper, London School of Economics and New York University. Schilke, O. (2014). On the contingent value of dynamic capabilities for competitive advantage: The nonlinear moderating effect of environmental dynamism.Strategic Management Journal,35(2), 179-203.