Introduction

This introduction presents an overview of the key concepts discussed in the subsequent chapters of this book. The book explains how trade affects growth, productivity and employment. It looks theoretically at national sovereignty in an interdependent world, how trade competition affects a small open economy and how trade in services – dividing tangible and intangible services – affects trade in goods and real wages. The book provides exercises on trade competition and reallocations in a small open economy based on highly referenced paper on measuring productivity in the heterogenous firm framework. It examines some important and fundamental features of services trade and investigates how well current modelling strategies capture these features. The book discusses that regional comparative advantage or industry agglomeration is another important reason to explain a region's export-growth potential. It contributes to the literature on how to measure productivity using firm level data.