Increasing returns, monopolistic competition, and international trade: Revisiting gains from trade

Sergey Kokovin, Pavel Molchanov () and Igor Bykadorov

Post-Print from HAL

Abstract: We study the canonical Krugman (1979) trade model with non-CES preferences that yield autarky at finite trade costs. We prove a non-monotone impact of gradual trade liberalization. At first, near autarky, emerging trade reduces world welfare, while at free trade it becomes large enough to be beneficial (Krugman's result). This non-monotonicity persists under heterogenous firms. The harmful small-scale trade is explained by variable markups and underpriced imports, which become socially excessive. Unlike protectionists, we argue that "liberalization should go far". On the other hand, we show that anti-dumping measures can be viewed as a remedy for the aforementioned imports distortion.

Keywords: Trade gains; Monopolistic competition; Variable markups; Harmful trade; Autarky (search for similar items in EconPapers)
Date: 2022-07
New Economics Papers: this item is included in nep-int
Note: View the original document on HAL open archive server: https://amu.hal.science/hal-03740561
References: Add references at CitEc
Citations: View citations in EconPapers (3)

Published in Journal of International Economics, 2022, 137, pp.103595. ⟨10.1016/j.jinteco.2022.103595⟩

Downloads: (external link)
https://amu.hal.science/hal-03740561/document (application/pdf)

Related works:
Journal Article: Increasing returns, monopolistic competition, and international trade: Revisiting gains from trade (2022)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-03740561

DOI: 10.1016/j.jinteco.2022.103595

Access Statistics for this paper

More papers in Post-Print from HAL
Bibliographic data for series maintained by CCSD ().