THE WELFARE OF NATIONS IN A GLOBALIZED ECONOMY Yochanan Shachmurove Department of Economics, The City College of The City University of New York and Department of Economics, The University of Pennsylvania Uriel Spiegel Department of Management, Bar Ilan University, and Department of Economics, The University of Pennsylvania Is free trade always good for advanced industrialized countries? Are fears of globalization and outsourcing imaginary, totally unfounded, and misguided? Is the West always going to benefit from technological improvements in the East? This article constructs a few thought experi- ments to analyze such issues. The article provides some rational insight into the puzzle of why global trade is so controversial. The effects of technological improvements in the East on the welfare of both the East and the West are analyzed. The conclusion highlights some of the less desirable effects of outsourcing in a more globalized world. KEYWORDS international trade, Ricardian Model, Samuelson, Gainers and losers from trade, East-West trade, North-South Trade, China, India, United States, outsourcing * * * * * Correspondence should be addressed to Professor Yochanan Shachmurove, Department of Economics, University of Pennsylvania, 3718 Locust Walk, Philadelphia, PA 19104-6297, USA. E-mail: yochanan@econ.sas.upenn.edu We would like to thank the two referees and the Editor of this journal for their generous and constructive advice. THE INTERNATIONAL TRADE JOURNAL, Volume 24, No. 3, July{September 2010 230 ISSN: 0885-3908 print/1521-0545 online. DOI: 10.1080/08853908.2010.491417