TY  - JOUR
AU  - Grossman,Gene M.
AU  - Rossi-Hansberg,Esteban
TI  - External Economies and International Trade Redux
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 14425
PY  - 2008
Y2  - October 2008
UR  - http://www.nber.org/papers/w14425
L1  - http://www.nber.org/papers/w14425.pdf
N1  - Author contact info:
Gene M. Grossman
International Economics Section
Department of Economics
Princeton University
Princeton, NJ 08544
Tel: 609/258-4823
Fax: 609/258-1374
E-Mail: grossman@princeton.edu

Esteban Rossi-Hansberg
Princeton University
Department of Economics
Fisher Hall
Princeton, NJ 08544-1021
Tel: 609/2584024
Fax: 650/725-5702
E-Mail: erossi@princeton.edu
AB  - We study a world with national external economies of scale at the industry level. In contrast to the standard treatment with perfect competition and two industries, we assume Bertrand competition in a continuum of industries. In this setting, many of the "pathologies" of the standard treatment disappear. There typically exists a unique equilibrium with trade guided by "natural" comparative advantage. And, when a country has CES preferences and any finite elasticity of substitution between goods, gains from trade are assured.
ER  -