Gains from Trade
The theory of gains from trade is almost as old as economics itself. Early contributions in trade theory were motivated by the desire to demonstrate the speciousness of protectionist policies advocated by the Mercantilist School. Adam Smith was among the first to point out the beneficial effects of international trade because it provided expanded opportunities for ‘division of labour’, or for what the modern writers call ‘specialisation’.
KeywordsHome Country Free Trade Custom Union Trade Diversion Pure Theory
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