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International Trade, Trade and Industrial Policy and Imperfect Competition: A Survey

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  • Venables, Anthony J

Abstract

The incorporation of details of industrial organisation into the study of international trade has been the subject of a fast growing recent literature which is surveyed in this paper. Whereas the conventional theory of trade deals almost exclusively with perfect competition and non-increasing returns to scale, the new literature models imperfect competition, increasing returns to scale and product differentiation. In Section 2, I discuss how adding imperfect competition to trade theory generates new insights for our understanding of such phenomena as intra-industry trade. With imperfect competition and increasing returns to scale, trade may affect welfare by changing the degree of competition, firm scale, and the number of product varieties available in an economy. Section 3 of the paper examines the extent to which free trade achieves these potential gains from trade under a variety of different types of competition and market structure. In the presence of imperfect competition there is generally scope for the active use of policy to raise welfare through changes in the terms of trade or by correcting distortions in the domestic economy. Sections 4 and 5 discuss the roles of both commercial and industrial policy, and show that the effects of policy are quite sensitive to the type of competition and market structure in the industry under study. Section 6 discusses the effects of one country's policy on other countries, and the role of coordinated commercial and industrial policy.

Suggested Citation

  • Venables, Anthony J, 1985. "International Trade, Trade and Industrial Policy and Imperfect Competition: A Survey," CEPR Discussion Papers 74, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:74
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    Citations

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    Cited by:

    1. Schiff, Maurice, 1999. "Trade, migration, and welfare : the impact of social capital," Policy Research Working Paper Series 2044, The World Bank.
    2. Lorenzo Pupillo & Klaus Zimmermann, 1991. "Relative export prices and firm size in imperfect markets," Open Economies Review, Springer, vol. 2(3), pages 295-304, October.
    3. Kala Krishna, 1990. "Export Restraints With Imperfect Competition: A Selective Survey," NBER Working Papers 3244, National Bureau of Economic Research, Inc.
    4. Bletschacher, Georg, 1991. "Ansätze strategischer Handels- und Industriepolitik: Ein Überblick," Kiel Working Papers 487, Kiel Institute for the World Economy (IfW).
    5. Athanasoglou, Panayiotis P. & Bardaka, Ioanna C., 2010. "New trade theory, non-price competitiveness and export performance," Economic Modelling, Elsevier, vol. 27(1), pages 217-228, January.
    6. J. David Richardson, 1989. "Empirical Research on Trade Liberalization With Imperfect Competition: A Survey," NBER Working Papers 2883, National Bureau of Economic Research, Inc.
    7. Weiss, Frank Dietmar & Heitger, Bernhard & Jüttemeier, Karl-Heinz & Kirkpatrick, Grant & Klepper, Gernot, 1988. "Trade policy in West Germany," Open Access Publications from Kiel Institute for the World Economy 374, Kiel Institute for the World Economy (IfW).
    8. Harris, R. G., 1989. "New theories of trade and the pattern of global specialisation," ILO Working Papers 992712813402676, International Labour Organization.

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