Monopolistic Competition, Optimum Product Diversity, and International Trade - The Role of Factor Endowment and Factor Intensities

Sugata Marjit and Biswajit Mandal

No 911, GLO Discussion Paper Series from Global Labor Organization (GLO)

Abstract: In this paper we revisit the influential theory of monopolistic competition and optimum product variety as developed by Dixit and Stiglitz (1977) with applications in international trade by Krugman (1979,1980), by modeling fixed and variable costs of production in terms of underlying use of skilled and unskilled labor in a single good model. This is different from earlier work on multi sector variant of Krugman cum Heckscher-Ohlin-Samuelson model such as Helpman (1981) and others. In our structure factor endowment and factor intensities determine both number of varieties and output per variety in a closed economy mimicking the features of Heckscher-Ohlin-Samuelson model. Differences in factor endowments across countries determine the pattern of trade between varieties and output per variety, which is indeterminate in a standard single good Dixit-Stiglitz-Krugman model. Later we reflect on wage inequality and unemployment providing some interesting results.

Keywords: Monopolistic Competition; Trade; Wage Inequality; Unemployment (search for similar items in EconPapers)
JEL-codes: D43 E24 F11 J31 (search for similar items in EconPapers)
Date: 2021
New Economics Papers: this item is included in nep-cwa, nep-isf and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.econstor.eu/bitstream/10419/237087/1/GLO-DP-0911.pdf (application/pdf)

Related works:
Working Paper: Monopolistic Competition, Optimum Product Diversity, and International Trade - The Role of Factor Endowment and Factor Intensities (2021)
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:zbw:glodps:911

Access Statistics for this paper

More papers in GLO Discussion Paper Series from Global Labor Organization (GLO) Contact information at EDIRC.
Bibliographic data for series maintained by ZBW - Leibniz Information Centre for Economics ().