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Alternative Sources of the Gains from International Trade: Variety, Creative Destruction, and Markups


  • Robert C. Feenstra


The modern theory of international trade identifies several additional sources of the gains from international trade beyond the gains from traditional comparative advantage. These are the gains from importing new product varieties; the gains from "creative destruction" as the relatively most productive firms expand their output by exporting while the less-productive firms exit; and the gains from competition between firms in different countries, which can lead to reduced markups. Estimates of these various gains are provided for the United States and other countries.

Suggested Citation

  • Robert C. Feenstra, 2018. "Alternative Sources of the Gains from International Trade: Variety, Creative Destruction, and Markups," Journal of Economic Perspectives, American Economic Association, vol. 32(2), pages 25-46, Spring.
  • Handle: RePEc:aea:jecper:v:32:y:2018:i:2:p:25-46
    Note: DOI: 10.1257/jep.32.2.25

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    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Pian Shu & Claudia Steinwender, 2019. "The Impact of Trade Liberalization on Firm Productivity and Innovation," Innovation Policy and the Economy, University of Chicago Press, vol. 19(1), pages 39-68.
    2. Fally, Thibault, 2019. "Generalized separability and the gains from trade," Economics Letters, Elsevier, vol. 178(C), pages 8-12.
    3. Keuschnigg, Christian & Kogler, Michael, 2018. "Trade and Credit Reallocation: How Banks Help Shape Comparative Advantage," CEPR Discussion Papers 13375, C.E.P.R. Discussion Papers.
    4. Kikkawa, Ayumu Ken & Sasahara, Akira, 2020. "Gains from trade and the sovereign bond market," European Economic Review, Elsevier, vol. 124(C).
    5. Timon Bohn & Steven Brakman & Erik Dietzenbacher, 2019. "Who's afraid of Virginia WU? The labor composition and labor gains of trade," CESifo Working Paper Series 7527, CESifo.
    6. Rod Tyers & Yixiao Zhou, 2020. "US–China rivalry: The macro policy choices," The World Economy, Wiley Blackwell, vol. 43(9), pages 2286-2314, September.
    7. Colantone, Italo & Crinò, Rosario & Ogliari, Laura, 2019. "Globalization and mental distress," Journal of International Economics, Elsevier, vol. 119(C), pages 181-207.
    8. Parteka, Aleksandra, 2020. "What drives cross-country differences in export variety? A bilateral panel approach," Economic Modelling, Elsevier, vol. 92(C), pages 48-56.
    9. Miaojie Yu, 2020. "China-US Trade War and Trade Talk," Springer Books, Springer, number 978-981-15-3785-1, January.

    More about this item

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade


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