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44 votes

Why does Taiwan dominate the semiconductors market?

This is because semiconductors have economies of scale over extremely large number of units produced. Economies of scale mean that the more you produce the cheaper production gets. Many firms will ...
1muflon1's user avatar
  • 57.2k
27 votes

Would poorer countries be better off by cutting off all trade with rich countries?

Would poorer countries be better off by cutting off all trade with rich countries? Almost certainly not. One of the largest consensus in economic profession is that free trade and openness is ...
1muflon1's user avatar
  • 57.2k
23 votes

Are financial markets "unique" for each "currency pair", or are they simply "translated"?

It's not clear what level of answer you're looking for, so here is a much more basic answer. There are indeed many exchanges with many different prices. However, if you have noticed that you could ...
Patrick Stevens's user avatar
20 votes
Accepted

How do economic sanctions work? How do they not create an arbitrage opportunity?

As the other answer says the sanctions include prohibition on selling to third parties. However, this still creates incentives to cheat on these sanctions. It is not always so easy to determine final ...
1muflon1's user avatar
  • 57.2k
13 votes

How could the economic cost of the world not speaking the same language be estimated?

To measure the costs of different people speaking different languages, researchers use a "linguistic distance" metric, see for example this paper. However, measuring the cost of linguistic diversity ...
emeryville's user avatar
  • 6,990
11 votes

How do economic sanctions work? How do they not create an arbitrage opportunity?

The short answer is yes, the impact of sanctions (and other export controls) on the market prices of goods can create an arbitrage opportunity for someone willing to violate or circumvent those ...
ajb's user avatar
  • 211
9 votes

Would poorer countries be better off by cutting off all trade with rich countries?

The Guardian article reports that poor workers make the rich richer. That may be unjust (the Guardian thinks so), but "Making the rich richer" is not the same as "making the poor poorer&...
david's user avatar
  • 191
8 votes

Can a closed economy flourish?

It depends on what you mean by "sustained growth" and "flourishing markets". Clearly the Earth as a whole is a big market. If you do not look at human made borders: the global economy is currently ...
Giskard's user avatar
  • 29.4k
8 votes

Are financial markets "unique" for each "currency pair", or are they simply "translated"?

Economic analysis always requires making some assumptions at some point. The assumptions that you make should try to fit reality the best that they can. Regarding your specific situation, there is a ...
jmbejara's user avatar
  • 9,355
7 votes

What are some critiques to the principle of comparative advantage?

One of the most common critiques is that the standard model is a static analysis. While a country might be better off today by focusing on its comparative advantage, its longer term prospects depend ...
Dan's user avatar
  • 1,366
7 votes

A valid argument against free trade?

I can get to more technical papers, but it's not a big secret what you have quoted. E.g. The Economist quotes MIT professor John Van Reenen: But just because the size of the pie expands [due to ...
got trolled too much this week's user avatar
7 votes
Accepted

Why do we spread knowledge across nations?

This is a long comment that is too long for the comment box. In fact, many research projects in US are secretive, especially the ones related to military. At the same time, much, much more research ...
High GPA's user avatar
  • 1,916
6 votes
Accepted

Why don't prices of USA labor and Mexican labor equalise?

The underlying reason for persistent wage differences is probably that Mexican workers are less productive than American workers. It is sufficient that workers in some tradeable sectors are more ...
Tobias's user avatar
  • 970
6 votes
Accepted

Are there plausible scenarios for the U.S. dollar to fall out of use as the world's reserve currency?

There are many plausible scenarios in which the dollar ceases to be the de-facto currency. They all have a few things in common. For people to stop using dollars for international trade, there would ...
farnsy's user avatar
  • 836
6 votes
Accepted

How is wealth created?

First we need to discuss what wealth is. Is it just the amassment of valubles? In the 16th-18th century, rulers thought so. This notion is called mercantilism. This idea was rejected by Adam Smith in ...
Klas Lindbäck's user avatar
6 votes
Accepted

Does the Rybczynski theorem also hold in modern trade theory models?

The Rybczynski theorem is not directly applicable to the Melitz (2003) model, because the model the Rybczynski theorem is originating from, the Heckscher-Ohlin model, is built on different assumptions ...
Hans-Peter Schrei's user avatar
5 votes
Accepted

Is a 'Brexit' really that bad?

tl;dr: Uncertainty & trade tariffs detail The economics have been assessed by a large number of economic specialists, including the very well-respected and independent Institute for Fiscal ...
410 gone's user avatar
  • 8,168
5 votes
Accepted

Omitted variables in gravity model

The omitted variable bias in gravity model is an important issue given that some factors are unobserved or difficult to quantity. To solve this issue trade economists tend to rely on various fixed ...
emeryville's user avatar
  • 6,990
5 votes
Accepted

Who exploits comparative advantage in international trade?

It's fine to make a supposition that it costs Colombia twice as much to make cars as coffee, and Japan twice as much to make coffee as cars. It's also fine to express these ratios in terms of the ...
Adam Bailey's user avatar
  • 8,529
5 votes

Does China subsidize its exports?

World Trade Organization (WTO) rules prohibit export subsidies and China joined the WTO almost 15 years ago (in December 2001). As a condition of membership, China had to eliminate export subsidies in ...
emeryville's user avatar
  • 6,990
5 votes
Accepted

Does trade lead to economic growth in the most basic models of trade?

It depends on how you define "growth". Trade models have multiple goods in them, so there's no unique way to define "growth" - you are just moving along a fixed production possibility frontier. You ...
Ege Erdil's user avatar
  • 691
5 votes

Why is Algeria the #2 milk powder importer in the world?

Four-fifths of Algeria is just desert --which leaves no room for agriculture. The Algerian economy is mostly powered just by the oil industry, which contribute about ~70% of government revenues. Oil ...
WorldGov's user avatar
  • 790
5 votes

Why is Algeria the #2 milk powder importer in the world?

To complement WorldGov's great points, there are milk subsidies provided in Algeria, which might have been abused for re-sale in other countries: [These measures of “market saturation” will be ...
JoaoBotelho's user avatar
  • 2,155
5 votes

Why are trade deficits considered unfair?

You are correct. Trade deficits are not unfair, although it is hard to define unfair in an economic sense. No one is forced to trade and trade represents a consensual agreement. The strongest ...
BB King's user avatar
  • 6,238
5 votes
Accepted

The term "Most Favoured Nation" is misleading to me. Please explain

You seem to have it the wrong way around. The act of country A extending Most Favoured Nation status to country B only affects the import tariffs on country B's products, not those on other ...
Giskard's user avatar
  • 29.4k
5 votes

What arguments are there in favor of national food self-sufficiency?

Have there been any economists who have argued in favor of national food self-sufficiency and what are some of their arguments? I am not knowledgeable of literature in that direction, but some of ...
Iñaki Viggers's user avatar
5 votes

What faction determines the strength of a state's currency and can that faction be rebelled?

Think of the exchange rate as the price of a currency—in this case the Thai baht. So the exchange rate (THBUSD in this case) is just how many USD you need to buy one THB. As you said, multiple factors ...
Art's user avatar
  • 2,792
5 votes

What faction determines the strength of a state's currency and can that faction be rebelled?

There is no central authority that determines the strength of currency in floating exchange rate regime as it’s determined by the market. As in every market you have demand and supply for currency. ...
1muflon1's user avatar
  • 57.2k
5 votes
Accepted

Why didn't other oil pricing benchmarks such as Brent go negative?

The Brent price is for oil physically delivered in the UK. The price that went negative if for oil delivered in West Texas, US. The physical and economic conditions at the two places are different - ...
simon at rcl's user avatar
4 votes

Why does the Balance of Payments have to (more or less) equal zero

It was also really strange for me at first. I asked from many people who might happen to know the answer. However, they were all not 100% satisfactory. I think, Kenny LJ's answer is 99.5% correct but ...
SugarkhuuR's user avatar

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