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For instance, the classical theory tells that the division of labor, known as “specialization”, on the transnational level allows each country to specialize in what it is strong for, which allows maximizing the value of its output, so that resources are not wasted in the goods production that could be imported more inexpensively than they can be produced domestically. Yet, it is important to bear in mind that this argument is true only when perfect competition, constant returns to scale, and fixed technology exist, and they are indeed not too realistic (Frankel, 2000), as it is obvious that, for example, competitions between developed and developing countries are certainly not fair...
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