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

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  • Robert C. Feenstra

Abstract

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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    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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