Current challenges of globalization in the light of the Ricardian trade theory

Abstract

This concluding chapter of the book starts with the observation that many problems in the world economy are not or only loosely related to globalization and thus could be solved by self-responsible countries. An important challenge of globalization is, however, caused by the frictions and the churning process of international trade that requires constant adjustments and flexibility by individuals. In the first part, we touch on this aspect in the light of an increasing fragmentation of the production process. In the second part, we extend the Ricardian model by allowing for international mobility of some inputs and argue that this fosters the churning process. In the third part, we emphasize that as countries are countries for a reason, they are likely to continue limiting the accessibility of some of their markets. We conclude that the study of “markets with overlapping domains” lies at the heart of Ricardian trade theory.