Discuss the Role of International Trade in the Economic Development

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The Answer is A country's comparative advantage can change over time. South Korea is a good example of a country changing its factor endowments and its comparative advantage. In the mid 1960s, the capital stock per worker in South Korea was approximately $2,000. By the early 1990s it was nearly $18,000. Less than 40 years ago, South Korea was a very poor developing country. GDP per capita at the end of the Korean War was less than $800. In less than 40 years, GDP per capita had increased to $7,251. Some of this progress can be attributed to the relative openness of the Korean economy. In the early 1950s exports plus imports as a percentage of GDP were a little more than 10 percent. By 1990 they were more than 60 percent. India is a good study in contrast. In the 1950s, India's GDP per capita was only slightly lower than South Korea's. India, like South Korea, was a labor-abundant country with a low capital stock per worker. The level of openness in the two economies was also similar in the early 1950s. Today India is still a poor, labor-abundant economy for many reasons. However, at least part of the story can be found by contrasting the rates at which the two economies opened themselves up to trade over the last 40 years.

Discuss the Role of International Trade in the Economic Development

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Discuss the Role of International Trade in the Economic Development

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