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Monopolistic Competition and International Trade: Reconsidering the Evidence

David Hummels and James Levinsohn

The Quarterly Journal of Economics, 1995, vol. 110, issue 3, 799-836

Abstract: We test some propositions about international trade flows that are derived from models of monopolistic competition developed by Elhanan Helpman and Paul Krugman. We investigate whether the volume of trade between OECD countries is consistent with the predictions of a model in which all trade is intraindustry trade in differentiated products. We then repeat the test with non-OECD countries. We also investigate whether the share of intraindustry trade is consistent with a more general theoretical model in which some, but not all, trade is intraindustry trade. Our results lead us to question the apparent empirical success of these models.

Date: 1995
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Working Paper: Monopolistic Competition and International Trade: Reconsidering the Evidence (1993)
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The Quarterly Journal of Economics is currently edited by Robert J. Barro, Lawrence F. Katz, Nathan Nunn, Andrei Shleifer and Stefanie Stantcheva

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