Trade and Trade Policy with Differentiated Products: A Chamberlinian-Ricardian Model: A Comment
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NBER Working Paper No. 12949
Issued in March 2007
NBER Program(s): ITI
This paper shows that the results of Venables (1987) depend critically on the assumption that there are no fixed costs of trade. The introduction of fixed costs of exporting, while making the model more consistent with the empirical evidence, leads to the opposite conclusion that technological progress in one country cannot harm the welfare of its trading partner. However, the results can be obtained in a richer setting with heterogeneous firms.
Published: Svetlana Demidova & Kala Krishna, 2007. "Trade and trade policy with differentiated products: A Chamberlinian - Ricardian model. A comment," Journal of International Trade & Economic Development, Taylor and Francis Journals, vol. 16(3), pages 435-441.
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