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Two and a Half Theories of Trade †

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  • J. Peter Neary

Abstract

Abstract This paper discusses the place of oligopoly in international trade theory, and argues that it is unsatisfactory to ignore firms altogether, as in perfectly competitive models, or to view large firms as more productive clones of small ones, as in monopolistically competitive models. Doing either fails to account for the granularity in the size distribution of firms and for the dominance of large firms in exporting. The paper outlines three ways of developing more convincing models of oligopoly, which allow for free entry but do not lose sight of the grains in granularity: heterogeneous industries, natural oligopoly, and superstar firms. Copyright 2009 The Author. Journal compilation 2009 Blackwell Publishing Ltd.

Suggested Citation

  • J. Peter Neary, 2010. "Two and a Half Theories of Trade †," The World Economy, Wiley Blackwell, vol. 33(1), pages 1-19, January.
  • Handle: RePEc:bla:worlde:v:33:y:2010:i:1:p:1-19
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    References listed on IDEAS

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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Why might you want oligopolistic models of trade?
      by jdingel in Trade diversion on 2010-05-27 06:11:17

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    Cited by:

    1. Gerda Dewit & Dermot Leahy, 2017. "Thinking Inside the Box: Policies Towards Footloose R&D Intensive Firms," Economics, Finance and Accounting Department Working Paper Series n285-17.pdf, Department of Economics, Finance and Accounting, National University of Ireland - Maynooth.
    2. Brander, James A. & Spencer, Barbara J., 2015. "Intra-industry trade with Bertrand and Cournot oligopoly: The role of endogenous horizontal product differentiation," Research in Economics, Elsevier, pages 157-165.
    3. Garcia Pires, Armando J., 2013. "Home market effects with endogenous costs of production," Journal of Urban Economics, Elsevier, vol. 74(C), pages 47-58.
    4. Melitz, Marc J. & Redding, Stephen J., 2014. "Heterogeneous Firms and Trade," Handbook of International Economics, Elsevier.
    5. Jacques-Francois Thisse & Philip Ushchev, 2016. "Monopolistic Competition Without Apology," HSE Working papers WP BRP 141/EC/2016, National Research University Higher School of Economics.
    6. di Giovanni, Julian & Levchenko, Andrei A., 2013. "Firm entry, trade, and welfare in Zipf's world," Journal of International Economics, Elsevier, pages 283-296.
    7. Gerda Dewit & Dermot Leahy, 2016. "Strategic R&D Commitment and the Gains from Trade," Review of International Economics, Wiley Blackwell, vol. 24(5), pages 1129-1148, November.
    8. repec:kap:jincot:v:17:y:2017:i:4:d:10.1007_s10842-017-0244-5 is not listed on IDEAS
    9. Eckel, Carsten & Iacovone, Leonardo & Javorcik, Beata & Neary, J. Peter, 2015. "Multi-product firms at home and away: Cost- versus quality-based competence," Journal of International Economics, Elsevier, vol. 95(2), pages 216-232.
    10. Lin, Faqin, 2015. "Learning by exporting effect in China revisited: An instrumental Approach," China Economic Review, Elsevier, vol. 36(C), pages 1-13.
    11. Koska, Onur A. & Stähler, Frank, 2014. "Trade and imperfect competition in general equilibrium," Journal of International Economics, Elsevier, vol. 94(1), pages 157-168.
    12. Paulo Bastos & Odd Rune Straume, 2012. "Globalization, product differentiation, and wage inequality," Canadian Journal of Economics, Canadian Economics Association, vol. 45(3), pages 857-878, August.
    13. Brekke, Kurt R. & Garcia Pires, Armando J. & Schindler, Dirk & Schjelderup, Guttorm, 2017. "Capital taxation and imperfect competition: ACE vs. CBIT," Journal of Public Economics, Elsevier, vol. 147(C), pages 1-15.
    14. Forslid, Rikard & Okubo, Toshihiro, 2014. "Spatial sorting with heterogeneous firms and heterogeneous sectors," Regional Science and Urban Economics, Elsevier, vol. 46(C), pages 42-56.
    15. Bekkers, Eddy & Francois, Joseph, 2013. "Trade and industrial structure with large firms and heterogeneity," European Economic Review, Elsevier, vol. 60(C), pages 69-90.
    16. Sergey Kokovin & Mathieu Parenti & Jacques-Francois Thisse & Philip Ushchev, 2017. "On the Dilution of Market Power," HSE Working papers WP BRP 176/EC/2017, National Research University Higher School of Economics.
    17. Kwok Tong Soo, 2015. "International trade and the division of labour," Working Papers 100181706, Lancaster University Management School, Economics Department.
    18. Keith Head & Barbara J. Spencer, 2017. "Oligopoly in International Trade: Rise, Fall and Resurgence," NBER Working Papers 23720, National Bureau of Economic Research, Inc.
    19. Lendle, Andreas & Olarrega, Marcelo & Schropp, Simon & Vézina, Pierre-Louis, 2013. "eBay’s anatomy," Economics Letters, Elsevier, vol. 121(1), pages 115-120.
    20. Federico Ciliberto & Ina C. Jäkel, 2017. "Exporter Price Premia?," Economics Working Papers 2017-09, Department of Economics and Business Economics, Aarhus University.
    21. Dorożyński Tomasz & Urbaniak Wojciech & Świerkocki Janusz, 2015. "The Location Premises Of FDI In Poland. The Case Of The Lodz Province / Przesłanki Lokalizacji Biz w Polsce. Przykład Regionu Łódzkiego," Comparative Economic Research, De Gruyter Open, vol. 18(4), pages 157-178, December.
    22. De Lucio, Juan & Mínguez, Raúl & Minondo, Asier & Requena, Francisco, 2017. "Los márgenes del crecimiento de las exportaciones españolas antes y después de la Gran Recesión /Spanish Trade Margins before and after the Great Recession," Estudios de Economía Aplicada, Estudios de Economía Aplicada, vol. 35, pages 43-62, Enero.
    23. Gaussens, Olivier & Lecostey, Sophie & Simon, Geoffray, 2011. "Intégration internationale et concurrence effective : quelques apports de la théorie de l’oligopole," L'Actualité Economique, Société Canadienne de Science Economique, vol. 87(4), pages 481-502, décembre.
    24. Rudy Colacicco, 2015. "Ten Years Of General Oligopolistic Equilibrium: A Survey," Journal of Economic Surveys, Wiley Blackwell, vol. 29(5), pages 965-992, December.

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