Industrial Organization and International Trade

This paper reviews recent work on the relationship between industrial
organization and international trade. Five strands in the theoretical
literature are discussed. First is the role of economies of scale
as a cause of intra-industry trade, modelled using monopolistic competition.
Second is the effect of tariffs and quotas on domestic market
power. Third is the analysis of dumping as international price discrimination.
Fourth is the potential strategy role of government policy as an
aid to domestic firms in oligopolistic competition. Finally, the paper
discusses recent work that may provide a new argument for protectionism.
A concluding section discusses recent efforts at quantification of new
trade theory.