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Why are losses from trade unlikely?

Listed author(s):
  • Bykadorov, Igor
  • Gorn, Alexey
  • Kokovin, Sergey
  • Zhelobodko, Evgeny

Examining a standard monopolistic competition model with unspecified utility/cost functions, we find necessary and sufficient conditions on their elasticities for welfare losses to arise from trade or market expansion. Two numerical examples explain the losses (under unrealistic elasticities).

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File URL: http://www.sciencedirect.com/science/article/pii/S0165176515000555
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Article provided by Elsevier in its journal Economics Letters.

Volume (Year): 129 (2015)
Issue (Month): C ()
Pages: 35-38

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Handle: RePEc:eee:ecolet:v:129:y:2015:i:c:p:35-38
DOI: 10.1016/j.econlet.2015.02.003
Contact details of provider: Web page: http://www.elsevier.com/locate/ecolet

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  1. Brander, James & Krugman, Paul, 1983. "A 'reciprocal dumping' model of international trade," Journal of International Economics, Elsevier, vol. 15(3-4), pages 313-321, November.
  2. Monika Mr?zov? & J. Peter Neary, 2014. "Together at Last: Trade Costs, Demand Structure, and Welfare," American Economic Review, American Economic Association, vol. 104(5), pages 298-303, May.
  3. Bykadorov Igor & Kokovin Sergey & Zhelobodko Evgeny, 2013. "Investments in Productivity under Monopolistic Competition: Large Market Advantage," EERC Working Paper Series 13/08e, EERC Research Network, Russia and CIS.
  4. Melitz, Marc J. & Redding, Stephen J., 2014. "Heterogeneous Firms and Trade," Handbook of International Economics, Elsevier.
  5. 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.
  6. Igor A. Bykadorov & Alexey A. Gorn & Sergey G. Kokovin & Evgeny V. Zhelobodko, 2014. "Losses From Trade In Krugman’s Model: Almost Impossible," HSE Working papers WP BRP 61/EC/2014, National Research University Higher School of Economics.
  7. Peter Neary & Monika Mrazova, 2013. "Not so demanding: Preference structure, firm behavior, and welfare," Economics Series Working Papers 691, University of Oxford, Department of Economics.
  8. Krugman, Paul R., 1979. "Increasing returns, monopolistic competition, and international trade," Journal of International Economics, Elsevier, vol. 9(4), pages 469-479, November.
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