International Trade, Migration And Investment With Horizontal Product Differentiation And Free Entry And Exit Of Firms
AbstractThis paper builds on a circular road model of the world with horizontal product differentiation and free entry and exit of firms, to derive results that can be applied in industrial organization, international trade and political economy. The model shows that freer international trade increases welfare -with ideal variety preferences through the exploitation of economies of scale and better allocative efficiency; that all participating countries gain from trade, and that smaller countries have more to win from free trade than larger countries. The model also explains that there may be adjustment costs when liberalizing trade and thus, political resistance to trade liberalization. International migration can also be analyzed with the model, showing the possibility of suboptimal migration flows and political barriers to the exit of national citizens. The model suggests that foreign direct investment will be welfare improving for the source country in the short run, and for the receiving country in the long run. Finally, the model provides a micro foundation for the use of demand curves with constant and negative slopes.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by UNIVERSIDAD DE LOS ANDES-CEDE in its series DOCUMENTOS CEDE with number 002917.
Date of creation: 05 Nov 2005
Date of revision:
Contact details of provider:
Other versions of this item:
- Hernan Vallejo, 2006. "International trade, migration and investment with horizontal product differentiation and free entry and exit of firms," REVISTA DE ECONOMÍA DEL ROSARIO, UNIVERSIDAD DEL ROSARIO.
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- BOCCARD, Nicolas & WAUTHY, Xavier, 1997.
"Export restraints and horizontal product differentiation,"
CORE Discussion Papers
1997082, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Boccard, N. & Wauthy, Xavier, 1997. "Export Restraints and Horizontal Product Differentiation," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 1997024, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES), revised 00 Sep 1997.
- B.Curtis Eaton & Richard G. Lipsey, 1972.
"The Principle of Minimum Differentiation Reconsidered: Some New Developments in the Theory of Spatial Competition,"
87, Queen's University, Department of Economics.
- Eaton, B Curtis & Lipsey, Richard G, 1975. "The Principle of Minimum Differentiation Reconsidered: Some New Developments in the Theory of Spatial Competition," Review of Economic Studies, Wiley Blackwell, vol. 42(1), pages 27-49, January.
- Krugman, Paul R., 1979. "Increasing returns, monopolistic competition, and international trade," Journal of International Economics, Elsevier, vol. 9(4), pages 469-479, November.
- Schmitt, Nicolas, 1995. "Product Imitation, Product Differentiation and International Trade," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 36(3), pages 583-608, August.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (UNIVERSIDAD DE LOS ANDES-CEDE).
If references are entirely missing, you can add them using this form.