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Two and a Half Theories of Trade

  • Neary, J Peter

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.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 7600.

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Date of creation: Dec 2009
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Handle: RePEc:cpr:ceprdp:7600
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  8. Head, Keith & Mayer, Thierry & Ries, John, 2002. "On the Pervasiveness of Home Market Effects," CEPR Discussion Papers 3454, C.E.P.R. Discussion Papers.
  9. J. Peter Neary, 2001. "Foreign competition and wage inequality," Working Papers 200102, School of Economics, University College Dublin.
  10. Paulo Bastos & Udo Kreickemeier, . "Unions, Competition and International Trade in General Equilibrium," Discussion Papers 08/28, University of Nottingham, GEP.
  11. Andrei A. Levchenko & Julian di Giovanni, 2009. "International Trade and Aggregate Fluctuations in Granular Economies," 2009 Meeting Papers 491, Society for Economic Dynamics.
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  20. J. Peter Neary, 2015. "International Trade in General Oligopolistic Equilibrium," CESifo Working Paper Series 5671, CESifo Group Munich.
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  40. Diewert, Erwin, 2007. "Index Numbers," Economics working papers diewert-07-01-03-08-17-23, Vancouver School of Economics, revised 31 Jan 2007.
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