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Monopolistic Competition and International Trade Theory

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Author Info
J. Peter Neary (University College Dublin)

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Abstract

Almost twenty-five years after the appearance of Dixit and Stiglitz’s paper on monopolistic competition and optimum product diversity, I try to take stock of the progress which has been made in applying their approach to international trade theory. I review the principal applications to trade theory and present a new one - by embedding DS preferences in a specific-factors framework, I sketch a model which shows how multinational corporations can emerge even between countries with similar factor endowments. Finally, I address some limitations of the approach, including its treatment of variety, returns to scale, entry and firms’ strategies.

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File URL: http://www.ucd.ie/economics/research/papers/2000/WP00.25.pdf
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File Function: First version, 2000
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Publisher Info
Paper provided by School Of Economics, University College Dublin in its series Working Papers with number 200025.

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Length: 36 pages
Date of creation: 19 Dec 2000
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Handle: RePEc:ucn:wpaper:200025

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Related research
Keywords: Dixit-Stiglitz model; international trade with increasing returns and product differentiation; monopolistic competition; multinational corporations;

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Find related papers by JEL classification:
F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies
F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
F10 - International Economics - - Trade - - - General

References listed on IDEAS
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.:

  1. Benassy, Jean-Pascal, 1996. "Taste for variety and optimum production patterns in monopolistic competition," Economics Letters, Elsevier, vol. 52(1), pages 41-47, July. [Downloadable!] (restricted)
  2. J. Peter Neary, 2001. "Of Hype and Hyperbolas: Introducing the New Economic Geography," Journal of Economic Literature, American Economic Association, vol. 39(2), pages 536-561, June. [Downloadable!] (restricted)
    Other versions:
  3. Helpman, Elhanan, 1998. "The Structure of Foreign Trade," CEPR Discussion Papers 2020, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  4. Spence, Michael, 1976. "Product Selection, Fixed Costs, and Monopolistic Competition," Review of Economic Studies, Blackwell Publishing, vol. 43(2), pages 217-35, June. [Downloadable!] (restricted)
  5. d'Aspremont, Claude & Dos Santos Ferreira, Rodolphe & Gerard-Varet, Louis-Andre, 1996. "On the Dixit-Stiglitz Model of Monopolistic Competition," American Economic Review, American Economic Association, vol. 86(3), pages 623-29, June. [Downloadable!] (restricted)
  6. Ethier, Wilfred J, 1986. "The Multinational Firm," The Quarterly Journal of Economics, MIT Press, vol. 101(4), pages 805-33, November. [Downloadable!] (restricted)
  7. Leamer, Edward E. & Levinsohn, James, 1995. "International trade theory: The evidence," Handbook of International Economics, in: G. M. Grossman & K. Rogoff (ed.), Handbook of International Economics, edition 1, volume 3, chapter 26, pages 1339-1394 Elsevier. [Downloadable!] (restricted)
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  8. Krugman, Paul R, 1981. "Intraindustry Specialization and the Gains from Trade," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 959-73, October. [Downloadable!] (restricted)
  9. Donald R. Davis & David E. Weinstein, 1998. "Market Access, Economic Geography and Comparative Advantage: An Empirical Assessment," Harvard Institute of Economic Research Working Papers 1850, Harvard - Institute of Economic Research.
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  10. Yang, Xiaokai & Heijdra, Ben J, 1993. "Monopolistic Competition and Optimum Product Diversity: Comment," American Economic Review, American Economic Association, vol. 83(1), pages 295-301, March. [Downloadable!] (restricted)
  11. Krugman, Paul, 1991. "Increasing Returns and Economic Geography," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 483-99, June. [Downloadable!] (restricted)
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  12. Kiminori Matsuyama, 1995. "Complementarities and Cumulative Processes in Models of Monopolistic Competition," Journal of Economic Literature, American Economic Association, vol. 33(2), pages 701-729, June. [Downloadable!] (restricted)
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  13. Romer, Paul M, 1990. "Endogenous Technological Change," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages S71-102, October. [Downloadable!] (restricted)
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  14. Krugman, Paul, 1980. "Scale Economies, Product Differentiation, and the Pattern of Trade," American Economic Review, American Economic Association, vol. 70(5), pages 950-59, December. [Downloadable!] (restricted)
  15. J. Peter Neary, 2000. "Competition, Trade and Wages," Working Papers 200020, School Of Economics, University College Dublin. [Downloadable!]
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  16. J. Peter Neary, 1995. "Factor Mobility and International Trade," Canadian Journal of Economics, Canadian Economics Association, vol. 28(s1), pages 4-23, November.
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  17. Ethier, Wilfred, 1979. "Internationally decreasing costs and world trade," Journal of International Economics, Elsevier, vol. 9(1), pages 1-24, February. [Downloadable!] (restricted)
  18. Ethier, Wilfred J, 1982. "National and International Returns to Scale in the Modern Theory of International Trade," American Economic Review, American Economic Association, vol. 72(3), pages 389-405, June. [Downloadable!] (restricted)
  19. Francois, Patrick & van Ypersele, Tanguy, 2002. "On the protection of cultural goods," Journal of International Economics, Elsevier, vol. 56(2), pages 359-369, March. [Downloadable!] (restricted)
  20. Helpman, Elhanan, 1987. "Imperfect competition and international trade: Evidence from fourteen industrial countries," Journal of the Japanese and International Economies, Elsevier, vol. 1(1), pages 62-81, March. [Downloadable!] (restricted)
  21. Krugman, Paul R., 1989. "Industrial organization and international trade," Handbook of Industrial Organization, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 2, chapter 20, pages 1179-1223 Elsevier. [Downloadable!] (restricted)
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  22. Flam, Harry & Helpman, Elhanan, 1987. "Industrial policy under monopolistic competition," Journal of International Economics, Elsevier, vol. 22(1-2), pages 79-102, February. [Downloadable!] (restricted)
  23. Dixit, Avinash K & Stiglitz, Joseph E, 1977. "Monopolistic Competition and Optimum Product Diversity," American Economic Review, American Economic Association, vol. 67(3), pages 297-308, June. [Downloadable!] (restricted)
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  24. Neary, J Peter, 1978. "Short-Run Capital Specificity and the Pure Theory of International Trade," Economic Journal, Royal Economic Society, vol. 88(351), pages 488-510, September. [Downloadable!] (restricted)
  25. Bohm Volker, 1994. "The Foundation of the Theory of Monopolistic Competition Revisited," Journal of Economic Theory, Elsevier, vol. 63(2), pages 208-218, August. [Downloadable!] (restricted)
  26. Lawrence, Colin & Spiller, Pablo T, 1983. "Product Diversity, Economies of Scale, and International Trade," The Quarterly Journal of Economics, MIT Press, vol. 98(1), pages 63-83, February. [Downloadable!] (restricted)
  27. Caves, Richard E, 1971. "International Corporations: The Industrial Economics of Foreign Investment," Economica, London School of Economics and Political Science, vol. 38(149), pages 1-27, February. [Downloadable!] (restricted)
  28. Alan Deardorff, 1998. "Determinants of Bilateral Trade: Does Gravity Work in a Neoclassical World?," NBER Chapters, in: The Regionalization of the World Economy, pages 7-32 National Bureau of Economic Research, Inc. [Downloadable!]
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  29. Roberts, John & Sonnenschein, Hugo, 1977. "On the Foundations of the Theory of Monopolistic Competition," Econometrica, Econometric Society, vol. 45(1), pages 101-13, January. [Downloadable!] (restricted)
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  30. Krugman, Paul R., 1979. "Increasing returns, monopolistic competition, and international trade," Journal of International Economics, Elsevier, vol. 9(4), pages 469-479, November. [Downloadable!] (restricted)
  31. Helpman, Elhanan, 1984. "A Simple Theory of International Trade with Multinational Corporations," Journal of Political Economy, University of Chicago Press, vol. 92(3), pages 451-71, June. [Downloadable!] (restricted)
Full references

Cited by:
(explanations, 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.)

  1. Henk Kox & Arjan Lejour, 2005. "Regulatory heterogeneity as obstacle for international services trade," CPB Discussion Papers 49, CPB Netherlands Bureau for Economic Policy Analysis. [Downloadable!]
  2. Tibor Besedes & Thomas J. Prusa, 2004. "Surviving the U.S. Import Market: The Role of Product Differentiation," NBER Working Papers 10319, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  3. J Peter Neary, 2002. "Competitive versus Comparative Advantage," Working Papers 200219, School Of Economics, University College Dublin. [Downloadable!]
    Other versions:
  4. Steven Brakman & Harry Garretsen & Charles van Marrewijk, 2007. "Cross-border Mergers and Acquisitions: On Revealed Comparative Advantage And Merger Waves," Tinbergen Institute Discussion Papers 08-013/2, Tinbergen Institute. [Downloadable!]
    Other versions:
  5. Carsten Eckel, 2003. "Does globalization lead to specialization?," cege – Center for European, Governance and Economic Development Research Discussion Papers 20, cege – Center for European, Governance and Economic Development Research, University of Goettingen (Germany).. [Downloadable!]
  6. BEHRENS, Kristian & MURATA, Yasusada, 2006. "Gains from trade and efficiency under monopolistic competition: a variable elasticity case," CORE Discussion Papers 2006049, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE). [Downloadable!]
  7. J Peter Neary, 2002. "Globalisation and Market Structure," Working Papers 200220, School Of Economics, University College Dublin. [Downloadable!]
    Other versions:
  8. Steven Brakman & Harry Garretsen & Charles van Marrewijk, 2006. "Cross-Border Mergers & Acquisitions: The Facts as a Guide for International Economics," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
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