Changing Paradigm in Trade Theories: A Review and Future Research Agenda

Objectives: The objectives of the study were to understand the evolution of trade theories and their application across nations over a period of time and to provide future direction of research for international trade. Methods/Statistical Analysis: To meet the objectives, the study undertook a comprehensive review of literature to bring together works of different researchers in the area of international trade. It summarizes the past theories and applications with the research advancements over the years. Findings: The study finds that over the years, research in international trade has evolved with new forms of models coming into existence. Many trade theories like absolute advantage, comparative advantage, factor endowment, factor price equalization, gravity model etc. have emerged and applied. At the same time, the trade environment across the developed and developing countries has metamorphosed with the advent of World Trade Organization and multiple trade blocs. Several factors have significantly gained importance, thus leading to a need of new dimensions in trade research. Conclusion/Improvements: The study proposes development of trade models which could incorporate pace of technological development and innovation, economic shocks like financial crisis, Brexit etc. and changes in global value chains. It also highlights the importance of future research in trade in services.