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Industrial Organization and International Trade

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  • Paul Krugman

Abstract

This paper reviews recent work on the relationship between industrial organization and international trade. Five strands in the theoretical literature are discussed. First is the role of economies of scale as a cause of intra-industry trade, modelled using monopolistic competition. Second is the effect of tariffs and quotas on domestic market power. Third is the analysis of dumping as international price discrimination. Fourth is the potential strategy role of government policy as an aid to domestic firms in oligopolistic competition. Finally, the paper discusses recent work that may provide a new argument for protectionism. A concluding section discusses recent efforts at quantification of new trade theory.

Suggested Citation

  • Paul Krugman, 1986. "Industrial Organization and International Trade," NBER Working Papers 1957, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:1957
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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. Michael Spence, 1976. "Product Selection, Fixed Costs, and Monopolistic Competition," Review of Economic Studies, Oxford University Press, vol. 43(2), pages 217-235.
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    4. James A. Brander & Barbara J. Spencer, 1981. "Tariffs and the Extraction of Foreign Monopoly Rents under Potential Entry," Canadian Journal of Economics, Canadian Economics Association, vol. 14(3), pages 371-389, August.
    5. Krugman, Paul, 1980. "Scale Economies, Product Differentiation, and the Pattern of Trade," American Economic Review, American Economic Association, vol. 70(5), pages 950-959, December.
    6. Harris, Richard, 1984. "Applied General Equilibrium Analysis of Small Open Economies with Scale Economies and Imperfect Competition," American Economic Review, American Economic Association, vol. 74(5), pages 1016-1032, December.
    7. Dixit, Avinash K. & Grossman, Gene M., 1986. "Targeted export promotion with several oligopolistic industries," Journal of International Economics, Elsevier, vol. 21(3-4), pages 233-249, November.
    8. Julio J. Rotemberg & Garth Saloner, 1986. "Quotas and the Stability of Implicit Collusion," NBER Working Papers 1948, National Bureau of Economic Research, Inc.
    9. Richard E. Baldwin & Paul Krugman, 1986. "Market Access and International Competition: A Simulation Study of 16K Random Access Memories," NBER Working Papers 1936, National Bureau of Economic Research, Inc.
    10. Barbara J. Spencer & James A. Brander, 1983. "International R & D Rivalry and Industrial Strategy," Review of Economic Studies, Oxford University Press, vol. 50(4), pages 707-722.
    11. 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.
    12. Jonathan Eaton & Gene M. Grossman, 1986. "Optimal Trade and Industrial Policy Under Oligopoly," The Quarterly Journal of Economics, Oxford University Press, vol. 101(2), pages 383-406.
    13. Barbara J. Spencer & James A. Brander, 1982. "Tariff Protection and Imperfect Competition," Working Papers 517, Queen's University, Department of Economics.
    14. Krishna, Kala, 1989. "Trade restrictions as facilitating practices," Journal of International Economics, Elsevier, vol. 26(3-4), pages 251-270, May.
    15. Brander, James A., 1981. "Intra-industry trade in identical commodities," Journal of International Economics, Elsevier, vol. 11(1), pages 1-14, February.
    16. Krugman, Paul R., 1979. "Increasing returns, monopolistic competition, and international trade," Journal of International Economics, Elsevier, vol. 9(4), pages 469-479, November.
    17. Rudolf Loertscher & Frank Wolter, 1980. "Determinants of intra-industry trade: Among countries and across industries," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 116(2), pages 280-293, June.
    18. Dixit, Avinash, 1984. "International Trade Policy for Oligopolistic Industries," Economic Journal, Royal Economic Society, vol. 94(376a), pages 1-16, Supplemen.
    19. Lancaster, Kelvin, 1980. "Intra-industry trade under perfect monopolistic competition," Journal of International Economics, Elsevier, vol. 10(2), pages 151-175, May.
    20. Brander, James A. & Spencer, Barbara J., 1985. "Export subsidies and international market share rivalry," Journal of International Economics, Elsevier, vol. 18(1-2), pages 83-100, February.
    21. Venables, Anthony J., 1985. "Trade and trade policy with imperfect competition: The case of identical products and free entry," Journal of International Economics, Elsevier, vol. 19(1-2), pages 1-19, August.
    22. Helpman, Elhanan, 1984. "A Simple Theory of International Trade with Multinational Corporations," Journal of Political Economy, University of Chicago Press, vol. 92(3), pages 451-471, June.
    23. Dixit, Avinash K & Kyle, Albert S, 1985. "The Use of Protection and Subsidies for Entry Promotion and Deterrence," American Economic Review, American Economic Association, vol. 75(1), pages 139-152, March.
    24. Krugman, Paul R, 1981. "Intraindustry Specialization and the Gains from Trade," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 959-973, October.
    25. Paul R. Krugman, 1984. "The U.S. Response to Foreign Industrial Targeting," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 15(1), pages 77-132.
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    Cited by:

    1. Stoelinga, G. J. & Viaene, J. -M. & Visscher, L. T., 1995. "Subsidized buyer credits: Atypical results in strategic trade theory," Economics Letters, Elsevier, vol. 47(2), pages 205-210, February.
    2. Ricardo Argüello C., 2006. "Sector agrícola y política de competencia," Revista de Economía Institucional, Universidad Externado de Colombia - Facultad de Economía, vol. 8(15), pages 227-249, July-Dece.
    3. Klette, Tor Jakob & Griliches, Zvi, 1996. "The Inconsistency of Common Scale Estimators When Output Prices Are Unobserved and Endogenous," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 11(4), pages 343-361, July-Aug..
    4. J. Peter Neary, 2000. "Monopolistic competition and international trade theory," Working Papers 200025, School of Economics, University College Dublin.
    5. Bruce W. Marion & Donghwan Kim, 1991. "Concentration change in selected food manufacturing industries: The influence of mergers vs. internal growth," Agribusiness, John Wiley & Sons, Ltd., vol. 7(5), pages 415-431.
    6. Bouckaert, Jan & Degryse, Hans, 2000. "Price competition between an expert and a non-expert," International Journal of Industrial Organization, Elsevier, vol. 18(6), pages 901-923, August.
    7. Stiegert, Kyle W. & Wang, Shinn-Shyr, 2003. "Imperfect Competition And Strategic Trade Theory: What Have We Learned," Working Papers 14589, International Agricultural Trade Research Consortium.
    8. Jan Fagerberg, 1993. "Technology, Trade Structure and Economic Integration - An examination of Intra-Nordic, Nordic-EC and Intra-EC trade 1961-1987," Working Papers Archives 1993489, Centre for Technology, Innovation and Culture, University of Oslo.
    9. Óscar Afonso, 2001. "The Impact of International Trade on Economic Growth," FEP Working Papers 106, Universidade do Porto, Faculdade de Economia do Porto.
    10. Joan A. Martín & Vicente Orts, 2001. "A two-stage analysis of monopolistic competition models of intraindustry trade," Investigaciones Economicas, Fundación SEPI, vol. 25(2), pages 315-333, May.
    11. Miller, Nolan H. & Pazgal, Amit, 2005. "Strategic trade and delegated competition," Journal of International Economics, Elsevier, vol. 66(1), pages 215-231, May.
    12. Michel Rainelli, 1996. "La firme multinationale dans la nouvelle économie industrielle internationale," Économie rurale, Programme National Persée, vol. 231(1), pages 5-11.
    13. Miller, Nolan & Pazgal, Amit, 2002. "Strategic Trade and Delegated Competition," Working Paper Series rwp02-042, Harvard University, John F. Kennedy School of Government.
    14. Yochanan Shachmurove & Uriel Spiegel, 2004. "Size Does Matter: International Trade and Population Size," PIER Working Paper Archive 04-035, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
    15. Fujimoto, Hiroaki & Park, Eun-Soo, 1997. "Optimal export subsidy when demand is uncertain," Economics Letters, Elsevier, vol. 55(3), pages 383-390, September.
    16. T. A. Bhavani & Suresh Tendulkar, 2001. "Determinants of firm-level export performance: a case study of Indian textile garments and apparel industry," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 10(1), pages 65-92.
    17. Iñaki Aguirre, 1999. "Information transmission and incentives not to price discriminate," Spanish Economic Review, Springer;Spanish Economic Association, vol. 1(3), pages 283-299.
    18. Paul Krugman, 2009. "The Increasing Returns Revolution in Trade and Geography," American Economic Review, American Economic Association, vol. 99(3), pages 561-571, June.
    19. repec:eee:ecolec:v:149:y:2018:i:c:p:129-139 is not listed on IDEAS
    20. Zhang, Anming & Zhang, Yimin, 1998. "An analysis of import protection as export promotion under economies of scale," Japan and the World Economy, Elsevier, vol. 10(2), pages 199-219, April.
    21. Haddad, Mona, 1993. "How trade liberalization affected productivity in Morocco," Policy Research Working Paper Series 1096, The World Bank.
    22. Benassy, Jean-Pascal, 1996. "Taste for variety and optimum production patterns in monopolistic competition," Economics Letters, Elsevier, vol. 52(1), pages 41-47, July.
    23. Emmanuel MOUSSONE, 2010. "Insertion des pays de la zone franc africaine dans le commerce mondial : étude d’une spécialisation appauvrissante et le problème du financement de l’économie (Insertion of the African Franc Zone Coun," Working Papers 231, Laboratoire de Recherche sur l'Industrie et l'Innovation. ULCO / Research Unit on Industry and Innovation.
    24. Sorgard, Lars, 1997. "Domestic merger policy in an international oligopoly: The Nordic market for electricity," Energy Economics, Elsevier, vol. 19(2), pages 239-253, May.

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    JEL classification:

    • L0 - Industrial Organization - - General

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