• Winston W. Chang
  • Seiichi Katayama


The orthodox theories of trade were developed under the two key assumptions of perfect competition and constant returns to scale, and the main trade determinants were found to be differences in technologies and differences in factor endowments between countries. The classical Ricardian theory assumes differences in technologies and demonstrates that a country will export a good whose production is relatively efficient, gaining a comparative advantage. The neoclassical Heckscher—Ohlin theory, on the other hand, assumes that countries have identical technologies but different factor endowments, and demonstrates that a capital-abundant country will export a good whose production is relatively capital intensive. The orthodox theories have thus successfully explained why countries with different technologies or factor endowments exchange goods produced in different industries. They are, however, hard pressed to explain the voluminous intra-industry trade between countries with similar endowments. Such intra-industry trade has been documented by Grubel and Lloyd (1975) as a major growth component in the postwar world trade.


National Welfare Trade Policy Imperfect Competition Factor Endowment Trade Theory 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.


Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.


  1. Brander, J. A. (1981), Intra-industry trade in identical commodities, Journal of International Economics 11, 1–14.CrossRefGoogle Scholar
  2. Brander, J. A. and P. R. Krugman (1983), A “reciprocal dumping” model of international trade, Journal of International Economics 15, 313–23.CrossRefGoogle Scholar
  3. Brander, J. A. and B. J. Spencer (1984), Trade warfare: tariffs and cartels, Journal of International Economics 16, 227–42.CrossRefGoogle Scholar
  4. Brander, J. A. and B. J. Spencer (1985), Export subsidies and international market share rivalry, Journal of International Economics 118, 83–100.CrossRefGoogle Scholar
  5. Cassing, J. (1977), International trade in the presence of pure monopoly in the non-traded goods sector, Economic Journal 187, 523–32.CrossRefGoogle Scholar
  6. Dixit, A. K. and J. E. Stiglitz (1977), Monopolistic competition and optimum product diversity, American Economic Review 167, 297–308.Google Scholar
  7. Dixit, A. K. and V. D. Norman (1980), Theory of International Trade. Cambridge: Cambridge University Press, chapter 9.CrossRefGoogle Scholar
  8. Eaton, J. and G. M. Grossman (1986), Optimal trade and industrial policy under oligopoly, Quarterly Journal of Economics 101, 383–406.CrossRefGoogle Scholar
  9. Ethier, W. J. (1979), Internationally decreasing costs and world trade, Journal of International Economics 9, 1–24.CrossRefGoogle Scholar
  10. Ethier, W. J. (1982), National and international returns to scale in the modern theory of international trade, American Economic Review 72, 950–59.Google Scholar
  11. Gasiorek, M., A. Smith, and A. Venables (1992), “1992”: trade and welfare-a general equilibrium model, in L. A. Winters (ed.), Trade Flows and Trade Policy after “1992”. Cambridge: Cambridge University Press, 35–63.Google Scholar
  12. Graham, F. D. (1923), Some aspects of protection further considered, Quarterly Journal of Economics 37, 199–227.Google Scholar
  13. Grossman, G. M. (ed.) (1992), Imperfect Competition and International trade. Cambridge, MA: The MIT Press.Google Scholar
  14. Grubel, H. G. and P. J. Lloyd (1975), Intra-industry Trade: The Theory and Measurement of International Trade in Differentiated Products. New York: John Wiley.Google Scholar
  15. Harris, J. R. and M. P. Todaro (1970), Migration, unemployment and development: a two-sector analysis, American Economic Review 160, 126–142.Google Scholar
  16. Helpman, E. (1981), International trade in the presence of product differentiation, economies of scale, and monopolistic competition: a ChamberlinHeckscher-Ohlin approach, Journal of International Economics 11, 305–340.CrossRefGoogle Scholar
  17. Helpman, E. and P. R. Krugman (1985), Market Structure and Foreign Trade. Cambridge, MA: MIT Press.Google Scholar
  18. Helpman, E. and P. R. Krugman (1989), Trade Policy and Market Structure. Cambridge, MA: MIT Press.Google Scholar
  19. Hicks, J. R. (1953), An inaugural lecture, Oxford Economic Papers 15, 117–135.Google Scholar
  20. Ikema, M. (1969), The effect of economic growth on the demand for imports: a simple diagram, Oxford Economic Papers 121, 66–69.Google Scholar
  21. Krugman, P. R. (1979), Increasing returns, monopolistic competition and international trade, Journal of International Economics 9, 467–479.CrossRefGoogle Scholar
  22. Krugman, P. R. (1980), Scale economies, product differentiation, and the pattern of trade, American Economic Review 70, 950–959.Google Scholar
  23. Krugman, P. R. (1990), Rethinking International Trade. Cambridge, MA: MIT Press.Google Scholar
  24. Krugman, P. R. (1994), Empirical evidence on the new trade theories: the current state of play, in D. Dodwell (ed.), New Trade Theories: A Look at the Empirical Evidence. London: Center for Economic Policy Research.Google Scholar
  25. Krugman, P. R. and A. Smith (1994), Empirical Studies of Strategic Trade Policy. Chicago: The University of Chicago Press.Google Scholar
  26. Lahiri, S. and Y. Ono (1988), Helping minor firms reduces welfare, Economic Journal 198, 1199–1202.CrossRefGoogle Scholar
  27. Lancaster, K. J. (1975), Socially optimal product differentiation, American Economic Review 65, 567–585.Google Scholar
  28. Lancaster, K. J. (1979), Variety, Equity and Efficiency. New York: Columbia University Press.Google Scholar
  29. Lancaster, K. J. (1980), Intra-industry trade under perfect monopolistic competition, Journal of International Economics 10, 151–175.CrossRefGoogle Scholar
  30. Markusen, J. R. (1981), Trade and the gains from trade with imperfect competition, Journal of International Economics 111, 531–551.CrossRefGoogle Scholar
  31. Melvin, J. R. and R. D. Warne (1973), Monopoly and the theory of international trade, Journal of International Economics 13, 117–134.CrossRefGoogle Scholar
  32. Ohlin, B. (1924), Handelns Teori. Stockholm: AB Nordiska Bokhandeln. English version in H. Flam and J. Flanders (eds.), Heckscher-Ohlin Trade Theory. Cambridge, MA: MIT Press, 1991.Google Scholar
  33. Salop, S. C. (1979), Monopolistic competition with outside goods, Bell Journal of Economics 10, 141–156.CrossRefGoogle Scholar
  34. Smith, A. and A. J. Venables (1988), Completing the internal market in the European Community, European Economic Review 132, 1501–1525.CrossRefGoogle Scholar
  35. Spence, A. M. (1976), Product selection, fixed costs, and monopolistic competition, Review of Economic Studies 143, 217–236.CrossRefGoogle Scholar
  36. Spencer, B. J. and J. A. Brander (1983), International R&D rivalry and industrial strategy, Review of Economic Studies 50, 707–722.CrossRefGoogle Scholar
  37. Suzuki, K. (1989), Choice between international capital and labor mobility for diversified economies, Journal of International Economics 127, 347–361.CrossRefGoogle Scholar
  38. Vousden, N. (1990), The Economics of Trade Protection. Cambridge: Cambridge University Press.CrossRefGoogle Scholar

Copyright information

© Springer Science+Business Media New York 1995

Authors and Affiliations

  • Winston W. Chang
  • Seiichi Katayama

There are no affiliations available

Personalised recommendations