Trade, Productivity and Welfare when Monopolistic Competition and Oligopoly Coexist

Kenji Fujiwara ()

No 170, Discussion Paper Series from School of Economics, Kwansei Gakuin University

Abstract: We develop a two-country general equilibrium model where monopolistically competitive and oligopolistic industries coexist, and intrafirm division of labor involves economies of scale. If market size increases, the productivity of all industries and welfare improve. However, as the proportion of trading sectors rises, the productivity of trading industries increases, but that of non-trading industries decreases. Although the welfare effect of expansion of trading sectors is analytically unclear, a numerical simulation tells that it is positive.

Pages: 26 pages
Date: 2018-01, Revised 2018-01
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