seminars

Krugman – gravity theory

Themes in international economics International economics Consists of issues raised by the special

problems of economic interaction between sovereign states (as opposed to trade between Florida and Ohio)

7 themes: The gains from trade The patterns of trade

Themes in international economics Protectionism The balance of paymenets Exchange rate determination International policy

coordination The international capital market

Inductive and deductive theories Deductive – built from premises –

Heckher Ohlin theory of international trade

Different factor endowmenets Different labor productivity Inductive – looking for patterns in data Theory derived from direct observations

The logic of the gravity model KRUGMAN: Why does gravity model work? „Broadly speaking, large economies tend to

spend large amount on imports because they have large incomes.

They also tend to attract large shares of other countries´s spending because they produce a wide range of products.

So the trade between any two economices is larger the larger is either economy“

Gravity model

The use o gravity model

Looking for anomalies Try to explain the anomalies Why Italy France and Spain less

trade then expected?

Dependency school narrative of debt crisis

CASH CROP Monocultures - particularly dangerous

because they create a state od dependency on a number of transnational corporations that control the market, are becoming the rule.

Subsistence crops are abandoned - countries that export agricutlural produce have to import the foodstuffs they need.

Thus Madagascar exports luxury-grade rice and is forced to import poor-grade rice to feed its people (Toussaint, Millet, 2010).

MDGs objective – povert eradication

Interconectedness of problems The issue of fishing is crucial because fish

provides at least 20% of the required animal protein to 2,6 billion people. But the situation has become critical.

FAO: Overall more than 75% of world fish stocs for which assessment information is available are reported as already fully expoited or overexploited (or depleted and recovering from depletio) reinforcing earlier observations that hte maximum wild capture fisheries potential from the world´s oceans has probably been reached (Toussaint, Millet; 2010).

Access to water

Slums Slum – is a dwelling in which at least one of

the three basic housing conditions is lacking: adequate hygiene, an adequate water supply

a lasting structure of sufficient living area. Increaded urban migration and demographic

growth have severly aggravated the problem. In 2005, 37% of town dwellers lived in slum (UN)

but the figure is 62% for Sub-Saharian Africa and 80% for Chad, the Central Africal Republic and Ethiopia.

Example of dependency sch. argument

Debt crisis