Trade and Interdependence
This term describes when a country produces one good more efficiently than its other goods, which means its resources work best when focused on that activity.
What is comparative advantage?
These goods come from the primary sector and include raw materials and agricultural outputs that receive little or no processing, unlike manufactured or service-based items.
What are primary products?
This choice governments face in the monetary system determines whether their currency stays at a stable value or moves with market forces, and divides winners between tradable-goods producers and domestic consumers.
What is the choice between fixed and floating exchange rates?
This type of international law forms gradually as states repeatedly follow certain practices and come to view them as legitimate and proper.
What is customary international law?
This type of foreign investment involves buying stocks, bonds, or other financial assets abroad, without taking any managerial control over the firms involved.
What is portfolio investment?
This term describes when a country produces more of a good than its competitors using the same amount of resources.
What is absolute advantage?
This strategy, used by many developing countries from the 1930s to the 1980s, tried to grow domestic industry by restricting imports, subsidizing local manufacturers, and expanding state ownership of major industries.
What is import-substituting industrialization, or ISI?
When governments raise interest rates to defend a currency’s value, this group tends to lose because borrowing becomes more expensive and growth slows.
Who are domestic borrowers or debtors?
This term describes how strongly an international rule binds states. When it is high, states must follow the rule in good faith and compensate others if they violate it.
What is obligation?
These are loans that private banks give to foreign governments.
What are sovereign loans?
This doctrine argues that governments should push exports, restrict imports, and seek a trade surplus. Its name links back to colonial-era policies built on hoarding surpluses from colonies.
What is neomercantilism?
This theory argues that leaders stay in office by satisfying the group that keeps them in power, using private benefits when the group is small and public goods when the group is large, shaping how governments spend their revenue.
What is selectorate theory?
This international institution often enters when states face balance-of-payments crises, offering loans tied to painful economic reforms.
What is the International Monetary Fund?
This type of noncompliance occurs when states fail to meet international rules not because they choose to violate them, but because they lack capacity, face unclear obligations, or misunderstand what the rules require.
What is benign noncompliance?
This type of investment involves acquiring or building facilities abroad, where the investor keeps managerial control over the overseas operation.
What is foreign direct investment?
This model says a country exports goods that use the production factors it has in large supply. A labor-rich state sends out labor-intensive goods, while a capital-rich state sends out capital-intensive goods.
What is the Heckscher-Ohlin theory?
In many Global South countries, leaders rely on narrow groups to stay in power. This political structure encourages private payoffs to elites, weak accountability, and chronic underinvestment in public goods, contributing to slow development.
What are small selectorates and small winning coalitions?
Rapid movement of money across borders increases both investment opportunities and the risk of sudden outflows. Governments facing this environment deal with heightened pressure on interest rates and exchange-rate commitments.
What is capital mobility?
This term refers to how clearly an international rule is defined. When it is high, states have less room to interpret the rule in different ways.
What is precision?
This term refers to policies that reduce consumption by cutting government spending, increasing taxes, and limiting wages.
What is austerity?
This model focuses on the specific industries where labor, land, and capital are used, instead of the factor itself, and explains trade politics through sector-based interests rather than factor endowments.
What is the Ricardo-Viner model?
Beginning in the mid-1960s, several East Asian states used this strategy to grow their economies by promoting manufacturing for foreign markets through export incentives and subsidies.
What is export-oriented industrialization, or EOI?
This exchange-rate arrangement commits governments to a fixed currency value but lets them shift that value when economic pressure becomes too strong to ignore.
What is an adjustable peg?
This form of noncompliance happens when states break international rules on purpose to gain something, whether strategic advantages or quick benefits from cheating.
What is malign noncompliance?
This theory predicts that owners of abundant factors support trade liberalization, while owners of scarce factors oppose it, but assumes that all factors move freely across sectors, which rarely holds in the short run.
What is the Stolper Samuelson theorem?