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Variable Returns to Scale, Non-Uniqueness of Equilibrium and the Gains from International Trade

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  • Murray C. Kemp
  • Albert G. Schweinberger

Abstract

Existing conditions for gainful trade under conditions of variable returns to scale are merely sufficient. Basing ourselves on the possible non-uniqueness of the production equilibrium under variable returns, we develop a globally valid necessary and sufficient condition for gainful trade. In particular, it is shown that trade may be gainful without changes in product prices, even if trade results in a loss of productivity.

Suggested Citation

  • Murray C. Kemp & Albert G. Schweinberger, 1991. "Variable Returns to Scale, Non-Uniqueness of Equilibrium and the Gains from International Trade," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 58(4), pages 807-816.
    • Handle: RePEc:oup:restud:v:58:y:1991:i:4:p:807-816.
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    Cited by:

    1. Jeffrey D. Sachs & Xiaokai Yang & Dingsheng Zhang, 1999. "Trade Pattern and Economic Development when Endogenous and Exogenous Comparative Advantages Coexist," CID Working Papers 03A, Center for International Development at Harvard University.
    2. Schweinberger, Albert G., 1994. "Public goods and commercial policy in more or less populous economies," Discussion Papers, Series II 219, University of Konstanz, Collaborative Research Centre (SFB) 178 "Internationalization of the Economy".
    3. Kylymnyuk Dmytro & Maliar Lilia & Maliar Serguei, 2007. "Rich, Poor and Growth-Miracle Nations: Multiple Equilibria Revisited," The B.E. Journal of Macroeconomics, De Gruyter, vol. 7(1), pages 1-44, August.
    4. Bryan Graham & Jonathan Temple, 2006. "Rich Nations, Poor Nations: How Much Can Multiple Equilibria Explain?," Journal of Economic Growth, Springer, vol. 11(1), pages 5-41, March.
    5. Jeffrey Sachs & Xiaokai Yang & Dingsheng Zhang, 2005. "Globalization, Dual Economy, And Economic Development," World Scientific Book Chapters, in: An Inframarginal Approach To Trade Theory, chapter 16, pages 349-382, World Scientific Publishing Co. Pte. Ltd..
    6. Roy J. Ruffin & Wilfred J. Ethier, 2011. "Protectionism and Increasing Returns with Comparative-Cost Disadvantage," PIER Working Paper Archive 11-027, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
    7. Mercenier, Jean, 1995. "Nonuniqueness of Solutions in Applied General Equilibrium Models with Scale Economies and Imperfect Competition," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 6(1), pages 161-177, June.
    8. Lloyd, P. J. & Schweinberger, A. G., 1997. "Conflict generating product price changes: The imputed output approach," European Economic Review, Elsevier, vol. 41(8), pages 1569-1587, August.
    9. Schweinberger, Albert G, 1996. "Procompetitive Gains from Trade and Comparative Advantage," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 37(2), pages 361-375, May.
    10. Dmytro Kylymnyuk & Lilia Maliar & Serguei Maliar, 2007. "A model of unbalanced sectorial growth with application to transition economies," Economic Change and Restructuring, Springer, vol. 40(4), pages 309-325, December.

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