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Abstract

This document introduces some of the most influential trade theory models. It requires no advanced economic background and presents the frameworks by means of a descriptive approach. For the ease of the reader, most of the technicalities (equations and graphs) that traditionally describe the models are not reproduced and the focus is put on acquiring a good intuition of the different economic rationales for trade openness. The Ricardian and Heckscher-Ohlin models explain why trade emerges between countries with different relative technologies or factor endowments, respectively. The Helpman-Krugman model adds product variety and economies of scale to understand why similar countries also trade. The Melitz model lets firms vary in productivity in order to investigate why only a few of them enter the export market. The core-periphery model allows for migration to describe the localization of economic activity. The last section introduces the new paradigm of global value chains.

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