Final answer:
The economic concept that encourages specialization and trade is comparative advantage, which allows nations to benefit from trade even if they do not have the absolute advantage in production. This leads to increased productivity and economic growth, as evidenced by the success of nations heavily involved in international trade.
Step-by-step explanation:
The economic concept that provides incentive for people and nations to specialize and enter into trade is known as comparative advantage. This principle suggests that even if one nation is less efficient at producing all kinds of goods compared to another nation, it still makes sense to specialize in the production of goods for which they have the least comparative disadvantage. By doing so, each nation can then trade with others to acquire goods that it does not produce as efficiently, thus benefiting from improved productivity and consumption possibilities.
Similar to comparative advantage is the concept of absolute advantage, which occurs when a nation is the most efficient producer of an item. However, it is comparative advantage that truly underscores the benefits of trade because it encourages nations to specialize according to their efficiencies, leading to gains from trade for all parties involved.
Trade is a powerful engine for economic growth and has accompanied the rise of economies around the globe. Nations like Japan, South Korea, China, and India have experienced significant economic development by integrating themselves into the international trade system. The evidence is clear that engaging in trade is a key factor in the prosperity of modern economies.