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Intra-industry Trade and the Variety of Home Products

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  • Chien-Fu Chou
  • Oz Shy
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Abstract

The authors provide a rigorous general equilibrium analysis of the welfare effects of international trade in the presence of differentiated home nontraded products as well as tradable products. They extend the standard monopolisitic competition framework to incorporate differentiated nontraded products and demonstrate that, in general, the gains-from-trade proposition applies also to this framework. However, the authors also show that trade may reduce the variety of home products and, thus, abstracting from all sources of gains from trade other than variety effects, they show that only in a very extreme case trade may make all countries worse off.

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File URL: http://links.jstor.org/sici?sici=0008-4085%28199105%2924%3A2%3C405%3AITATVO%3E2.0.CO%3B2-R
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Bibliographic Info

Article provided by Canadian Economics Association in its journal Canadian Journal of Economics.

Volume (Year): 24 (1991)
Issue (Month): 2 (May)
Pages: 405-16

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Handle: RePEc:cje:issued:v:24:y:1991:i:2:p:405-16

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Postal: Canadian Economics Association Prof. Steven Ambler, Secretary-Treasurer c/o Olivier Lebert, CEA/CJE/CPP Office C.P. 35006, 1221 Fleury Est Montréal, Québec, Canada H2C 3K4
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Cited by:
  1. Kazumichi Iwasa & Toru Kikuchi, 2009. "Indirect network effects and the impact of trade liberalization: A note," Journal of International Trade & Economic Development, Taylor and Francis Journals, vol. 18(4), pages 541-552.
  2. Glazer, Amihai & Gradstein, Mark & Ranjan, Priya, 2003. "Consumption variety and urban agglomeration," Regional Science and Urban Economics, Elsevier, vol. 33(6), pages 653-661, October.

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