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Background Imagine that you work for the World Bank and you have been called to Ghana to aid the new president to come up with

Background

Imagine that you work for the World Bank and you have been called to Ghana to aid the new president to come up with a new international trade strategy.

You are told that the new government is interested in moving away from agriculture and into manufacturing. To do so, the government wants to pursuit a policy of import substitution industrialisation (ISI).

You are given a brief about Ghana highlighting the following points:

  • About half of Ghana's population depends on agriculture, but Ghana still imports some of its food.
  • The majority of Ghana's people live in rural areas and exist on a subsistence way of life.
  • Ghana has one of the highest rates of income inequality in the world.
  • Nearly half of the population is employed in agriculture.

QUESTION B.1

Why would Ghana trade with a country that is very similar to it? Will trade between Ghana and an almost identical neighbor be governed by comparative advantage?

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