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Monopolistic Competition and International Trade: Reconsidering the Evidence

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  • David Hummels
  • James Levinsohn

Abstract

We test some propositions about international trade flows that are derived from models of monopolistic competition developed by Elhanan Helpman and Paul Krugman. We investigate whether the volume of trade between OECD countries is consistent with the predictions of a model in which all trade is intraindustry trade in differentiated products. We then repeat the test with non-OECD countries. We also investigate whether the share of intraindustry trade is consistent with a more general theoretical model in which some, but not all, trade is intraindustry trade. Our results lead us to question the apparent empirical success of these models.

Suggested Citation

  • David Hummels & James Levinsohn, 1995. "Monopolistic Competition and International Trade: Reconsidering the Evidence," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 110(3), pages 799-836.
    • Handle: RePEc:oup:qjecon:v:110:y:1995:i:3:p:799-836.
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    File URL: http://hdl.handle.net/10.2307/2946700
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    JEL classification:

    • F1 - International Economics - - Trade

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