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The Fallacy of Free Trade

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  • Batra, Ravi

Abstract

The purpose of this paper is to explode the myth of free trade. Productivity and real wages in the U.S. rose sharply between 1950 and 1972, but since then real earnings have been falling in spite of a continuous rise in productivity. It turns out that America was more or less a closed economy until 1972, as its trade/GNP ratio was close to 10 percent; but since then it has become an open economy. The theoretical model shows how real wages may fall in an open economy, but not in a closed economy, in spite of rising productivity. Copyright 1992 by Blackwell Publishing Ltd.

Suggested Citation

  • Batra, Ravi, 1992. "The Fallacy of Free Trade," Review of International Economics, Wiley Blackwell, vol. 1(1), pages 19-31, November.
    • Handle: RePEc:bla:reviec:v:1:y:1992:i:1:p:19-31
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    Cited by:

    1. Barua, Alokesh & Pant, Manoj, 2014. "Trade and wage inequality: A specific factor model with intermediate goods," International Review of Economics & Finance, Elsevier, vol. 33(C), pages 172-185.
    2. Narayan, Paresh Kumar & Narayan, Seema, 2013. "The short-run relationship between the financial system and economic growth: New evidence from regional panels," International Review of Financial Analysis, Elsevier, vol. 29(C), pages 70-78.
    3. Muhammad Arshad Khan & Abdul Qayyum, 2006. "Trade Liberalisation, Financial Sector Reforms, and Growth," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 45(4), pages 711-731.
    4. Oladi, Reza & Beladi, Hamid, 2009. "Market interconnection and wages," Economics Letters, Elsevier, vol. 105(1), pages 117-119, October.
    5. Yochanan Shachmurove & Uriel Spiegel, 2004. "Size Does Matter: International Trade and Population Size," PIER Working Paper Archive 04-035, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
    6. Hamid Beladi & Ravi Batra, 2004. "Traded and Nontraded Goods and Real Wages," Review of Development Economics, Wiley Blackwell, vol. 8(1), pages 1-14, February.
    7. Jin, Jang C., 2006. "Openness, growth, and inflation: Evidence from South Korea before the economic crisis," Journal of Asian Economics, Elsevier, vol. 17(4), pages 738-757, October.
    8. Muhammad Arshad Khan & Muhammad Abdul Qayyum, 2007. "Trade, Financial and Growth Nexus in Pakistan," Economic Analysis Working Papers (2002-2010). Atlantic Review of Economics (2011-2016), Colexio de Economistas de A Coruña, Spain and Fundación Una Galicia Moderna, vol. 6, pages 1-24, December.
    9. Qazi Hye, 2012. "Long term effect of trade openness on economic growth in case of Pakistan," Quality & Quantity: International Journal of Methodology, Springer, vol. 46(4), pages 1137-1149, June.
    10. Wong Hock Tsen, 2006. "Granger causality tests among openness to international trade, human capital accumulation and economic growth in China: 1952-1999," International Economic Journal, Taylor & Francis Journals, vol. 20(3), pages 285-302.
    11. Fahad Israr & Miguel Rocha de Sousa, 2018. "Long run analysis of trade openness on economic growth for Pakistan; Evidence from standard and optimal time series tests," CEFAGE-UE Working Papers 2018_01, University of Evora, CEFAGE-UE (Portugal).
    12. Jones, Ronald W., 1996. "International trade, real wages, and technical progress: The specific-factors model," International Review of Economics & Finance, Elsevier, vol. 5(2), pages 113-124.
    13. Domingues, Edson Paulo & Haddad, Eduardo Amaral, 2005. "Sensitivity Analysis in Computable General Equilibrium Models: An Application for the Regional Effects of the Free Trade Area of the Americas (FTAA)," Brazilian Review of Econometrics, Sociedade Brasileira de Econometria - SBE, vol. 25(1), May.
    14. Kwan Choi, E. & Beladi, Hamid, 1998. "Welfare reducing trade and optimal trade policy," Japan and the World Economy, Elsevier, vol. 10(2), pages 187-198, April.
    15. Shahbaz, Muhammad, 2012. "Does trade openness affect long run growth? Cointegration, causality and forecast error variance decomposition tests for Pakistan," Economic Modelling, Elsevier, vol. 29(6), pages 2325-2339.
    16. Jones, Ronald Winthrop, 1995. "International trade, real wages and technical progress: The specific factors model," Discussion Papers, Series II 274, University of Konstanz, Collaborative Research Centre (SFB) 178 "Internationalization of the Economy".
    17. Muhammad Arshad Khan & Abdul Qayyum, 2007. "Trade Liberalisation, Financial Development and Economic Growth," Trade Working Papers 22204, East Asian Bureau of Economic Research.
    18. Ravi Batra & Hamid Beladi & Reza Oladi, 2013. "Technical Progress and Real Wages Once again," Review of International Economics, Wiley Blackwell, vol. 21(3), pages 506-518, August.
    19. Jin, Jang C., 2006. "Can openness be an engine of sustained high growth rates and inflation?: Evidence from Japan and Korea," International Review of Economics & Finance, Elsevier, vol. 15(2), pages 228-240.
    20. Aka, B.F., 2006. "Openness, Globalization and Economic Growth: Empirical Evidence from Cote d´Ivoire, 1969-2002," International Journal of Applied Econometrics and Quantitative Studies, Euro-American Association of Economic Development, vol. 3(2), pages 67-86.
    21. Henry Thompson & John Francis, 2009. "Tariff Elimination and the Wage Gap in an Industrial Specific Factors Model," Review of International Economics, Wiley Blackwell, vol. 17(3), pages 447-460, August.
    22. Sharma, Susan Sunila, 2010. "The relationship between energy and economic growth: Empirical evidence from 66 countries," Applied Energy, Elsevier, vol. 87(11), pages 3565-3574, November.
    23. Dibyendu Maiti & Sugata Marjit, 2015. "Regional Openness, Income Growth and Disparity during 1980–2009," South Asia Economic Journal, Institute of Policy Studies of Sri Lanka, vol. 16(1), pages 145-166, March.

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