NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Increasing Returns and the Theory of International Trade

Paul R. Krugman

NBER Working Paper No. 1752*
Issued in November 1985
NBER Program(s):   ITI    IFM

Increasing returns are as fundamental a cause of international trade as comparative advantage, but their role has until recently been neglected because of the problem of modelling market structure. Recently substantial theoretical progress has been made using three different approaches. These are the Marshallian approach, where economies of scale are assumed external to firms; the Chamberlinian approach, where imperfect competition takes the relatively tractable form of monopolistic competition; and the Cournot approach of noncooperative quantity-setting firms. This paper surveys the basic concepts and results of each approach. It shows that some basic insights are not too sensitive to the particular model of market structure. Although much remains to be done, we have made more progress toward a general analysis of increasing returns and trade than anyone would have thought possible even a few years ago.

*Published: Published as "Urban Concentration: The Role of Increasing Returns and Transport Goods", IRSR, Vol. 19, no. 1/2 (1996): 5-30. (With James Brander) Published as "A 'Reciprocal Dumping' Model of International Trade", JINTE, Vol. 15, no. 3/4 (1983): 313-322. Published as "Increasing Returns and Economic Geography", JPE, Vol. 99,no. 3 (1991): 483-499.

You may purchase this paper on-line in .pdf format from SSRN.com ($5) for electronic delivery.

Information about Free Papers

You should expect a free download if you are a subscriber, a corporate associate of the NBER, a journalist, a site with your domain name in ".GOV", or a resident of nearly any developing country or transition economy.

If you usually get free papers at work/university but do not at home, you can either connect to your work VPN or proxy (if any) or elect to have a link to the paper emailed to your work email address below. The email address must be connected to a subscribing college, university, or other subscribing institution. Gmail and other free email addresses will not have access.

E-mail:

Machine-readable bibliographic record - MARC, RIS, BibTeX

 
Publications
Activities
Meetings
Data
People
About

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org