IDEAS home Printed from
MyIDEAS: Login to save this paper or follow this series

How New is the "New Trade Theory" of the Past Two Decades?

  • Andrea Maneschi


    (Department of Economics, Vanderbilt University)

Registered author(s):

    This paper looks at the paradigm of the past two decades that goes under the name of "new trade theory" or "new international economics", and rejects the assumptions underlying mainstream trade theory such as constant returns to scale and perfect competition. Authors contributing to it include Krugman, Dixit, Lancaster, Grossman, Helpman, Brander, Spencer and Ethier. After describing the main tenets of this new paradigm, Section 1 explores in greater depth the reasons for its birth. The new trade theory offers rationales for trade that often dispense altogether with the notion of comparative advantage, and new insights into the nature of the gains from trade. Section 2 examines its antecedents in the history of economic thought, which hark back to Adam Smith's productivity theory of trade according to which productivity rises when specialization is stimulated by a more extended market. Section 3 attempts to measure the "progress" which the new trade theory has achieved with respect to these classical antecedents, and studies its relation to the infant industry argument for protection popularized by J. S. Mill. Section 4 assesses the progress claimed by the new trade theorists with respect to the mainstream theory of trade. Section 5 draws some conclusions, and explores whether the theoretical advances of the new trade theory constitute a net advance over similar theories formulated in the classical period.

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

    File URL:
    File Function: First version, 2000
    Download Restriction: no

    Paper provided by Vanderbilt University Department of Economics in its series Vanderbilt University Department of Economics Working Papers with number 0027.

    in new window

    Date of creation: Jul 2000
    Date of revision:
    Handle: RePEc:van:wpaper:0027
    Contact details of provider: Web page:

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

    as in new window
    1. Paul Krugman, 1986. "Strategic Trade Policy and the New International Economics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262610450, June.
    Full references (including those not matched with items on IDEAS)

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:van:wpaper:0027. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (John P. Conley)

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.