In this unique Capitol Hill Campus course, Dr. Antony Davies of Duquesne University conducted an interactive “economic experiment”, or game, to demonstrate firsthand how individuals and markets relate.

1. The Fundamentals of Trade
Capitol Hill Campus
May 21, 2010
copies of this presentation can be found at
www.antolin-davies.com
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2. Protectionist Assumption:
Trade leads to a centralization of political power, decreased
competition, and the concentration of wealth.
Free Trade Assumption:
Trade leads to a decentralization of political power, increased
competition, and the dissemination of wealth.
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3. $40,000
Greater per-capita trade is associated with greater per-capita income.
$35,000
$30,000
R2 = 0.56
Per-capita Trade (US$)
$25,000
$20,000
$15,000
$10,000
$5,000
$0
$0 $5,000 $10,000 $15,000 $20,000 $25,000 $30,000 $35,000 $40,000 $45,000
Per-capita Income (US$)
Source: International Financial Statistics, International Monetary Fund, December 2001
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4. Greater per-capita trade appears to be a necessary
condition for more equitable income distributions…
$40,000
$35,000
$30,000
Per-capita Trade (US$)
$25,000
$20,000
$15,000
$10,000
$5,000
$0
15.0 20.0 25.0 30.0 35.0 40.0 45.0 50.0 55.0 60.0
Source: International Financial Statistics, International Monetary Fund, December 2001, and Measuring Income Inequality: A New Database, Deininger, Klaus,
65.0
and Lyn Squire, World Bank, 2002 Gini Coefficient (0 = equitable, 100 = inequitable)
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5. …and this also appears to hold among the poorest countries.
$3,000 Lithuania
$2,500
Fiji Thailand
$2,000
Per-capita Trade (US$)
$1,500
$1,000 Ukraine
$500
$0
Source: International Financial Statistics, International Monetary Fund, December 2001, and Measuring Income Inequality: A New Database, Deininger, Klaus,
15.0 20.0 25.0 30.0 35.0 40.0 45.0 50.0 55.0 60.0 65.0
and Lyn Squire, World Bank, 2002
Gini Coefficient (0 = equitable, 100 = inequitable)
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6. $100,000
recommended
Per-capita Trade (US$, logarithmic scale)
$10,000
$1,000
$100
$10
Greater per-capita trade is associated
with greater caloric intake.
$1
1,500 2,000 2,500 3,000 3,500 4,000
Daily per capita Supply of Calories
Source: International Financial Statistics, International Monetary Fund, December 2001, and World Development Indicators, World Bank, 2002
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7. $100,000
GDI measures quality of life (longevity,
education, literacy, income) for women
relative to men.
Per-capita Trade (US$, logarithmic scale)
$10,000
Greater per-capita trade is associated with
R2 = 0.80
greater gender equality.
$1,000
$100
$10
$1
0.00 0.10 0.20 0.30 0.40 0.50 0.60 0.70 0.80 0.90 1.00
Gender Related Development Index (0 = low gender adjusted HDI, 1 = high gender
adjusted HDI)
Source: International Financial Statistics, International Monetary Fund, December 2001, and Human Development Report, United Nations Development Programme,
2002
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8. Greater per-capita trade is associated with reduced child labor.
$100,000
$10,000
Per-capita Trade (US$, logarithmic scale)
$1,000
R2 = 0.54
$100
$10
$1
Source: International Financial Statistics, International Monetary Fund, December 2001, and World Development Indicators, World Bank, 2002
0 10 20 30 40 50
Children 10 to 14 in the Labor Force (as % of age group)
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9. Per-capita Trade (US$, logarithmic scale) $10,000
$1,000
$100
$10
Even among middle-lower and lower income countries, greater per-capita
trade is associated with reduced child labor.
$1
0 10 20 30 40 50 60
Children 10 to 14 in the Labor Force (as % of age group)
Source: International Financial Statistics, International Monetary Fund, December 2001, and World Development Indicators, World Bank, 2002
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10. January 1975 to June 2006
12%
Greater per-capita trade is associated with reduced unemployment.
10%
U.S. Unemployment Rate
Unemployment Rate
8%
6%
4%
2%
On average, a 1 percentage point increase in trade is associated with a
½ percentage point reduction in unemployment.
0%
12% 14% 16% 18% 20% 22% 24% 26% 28% 30%
U.S. Trade (imports plus exports) as % of GDP
Trade
Source: Bureau of Labor Statistics, and Bureau of Economic Analysis
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11. January 1975 to June 2006
$15.00
Greater per-capita trade is associated with increased real wages.
Average Real Hourly Earnings (2000$)
U.S.Average Real Hour ly Earnings (2000$)
$14.50
$14.00
$13.50
$13.00
$12.50
On average, a 1 percentage point increase in trade is associated with a
$0.25 per hour increase in real wages.
$12.00
12% 14% 16% 18% 20% 22% 24% 26% 28% 30%
U.S. Trade (imports plus exports) as % of GDP
Trade
Source: Bureau of Labor Statistics, and Bureau of Economic Analysis
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