Explaining the Volume of Trade: An Eclectic Approach

James Markusen

Chapter 9 in Broadening Trade Theory:Incorporating Market Realities into Traditional Models, 2021, pp 177-186 from World Scientific Publishing Co. Pte. Ltd.

Abstract: Divide the world into a capital-abundant North and a labor-abundant South. Subdivide the North into two identical regions, East and West. Modern trade theory predicts intra-industry trade in differentiated manufactured goods between East and West, and traditional interindustry trade based on factor endowments between North and South. The model I develop explains both the volume and the direction of trade by combining nonhomothetic preferences with scale economies and differences in endowments.

Keywords: Multinational Firms; Horizontal Multinationals; Vertical Multinationals; Internalization; Vertical Integration; Outsourcing; Foreign Affiliates; Per-Capita Income; Non-homothetic Preferences; Income Elasticity of Demand; Missing Trade Puzzle; Skill Premium Puzzle; Pro-competitive Gains From Trade; Complements; Externalities (search for similar items in EconPapers)
JEL-codes: F00 F02 F13 F41 F43 (search for similar items in EconPapers)
Date: 2021
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Journal Article: Explaining the Volume of Trade: An Eclectic Approach (1986)
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