External Economies and International Trade ReduxGene M. Grossman, Esteban Rossi-Hansberg
NBER Working Paper No. 14425 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.
Machine-readable bibliographic record - MARC, RIS, BibTeX Document Object Identifier (DOI): 10.3386/w14425 Published: Gene M. Grossman & Esteban Rossi-Hansberg, 2010.
"External Economies and International Trade Redux,"
The Quarterly Journal of Economics,
MIT Press, vol. 125(2), pages 829-858, May.
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