Variable Returns to Scale, Non-Uniqueness of Equilibrium and the Gains from International Trade

Murray Kemp and Albert Schweinberger

The Review of Economic Studies, 1991, vol. 58, issue 4, 807-816

Abstract: Existing conditions for gainful trade under conditions of variable returns to scale are merely sufficient. Basing ourselves on the possible non-uniqueness of the production equilibrium under variable returns, we develop a globally valid necessary and sufficient condition for gainful trade. In particular, it is shown that trade may be gainful without changes in product prices, even if trade results in a loss of productivity.

Date: 1991
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