Trade and Trade Policy with Differentiated Products: A Chamberlinian-Ricardian Model: A Comment

8 Pages Posted: 9 Mar 2007

See all articles by Svetlana A. Demidova

Svetlana A. Demidova

Department of Economics, McMaster University

Kala Krishna

Pennsylvania State University - Department of Economics; National Bureau of Economic Research (NBER)

Date Written: March 2007

Abstract

This paper shows that the results of Venables (1987) depend critically on the assumption that there are no fixed costs of trade. The introduction of fixed costs of exporting, while making the model more consistent with the empirical evidence, leads to the opposite conclusion that technological progress in one country cannot harm the welfare of its trading partner. However, the results can be obtained in a richer setting with heterogeneous firms.

Suggested Citation

Demidova, Svetlana A. and Krishna, Kala, Trade and Trade Policy with Differentiated Products: A Chamberlinian-Ricardian Model: A Comment (March 2007). NBER Working Paper No. w12949, Available at SSRN: https://ssrn.com/abstract=969627

Svetlana A. Demidova (Contact Author)

Department of Economics, McMaster University ( email )

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Kala Krishna

Pennsylvania State University - Department of Economics ( email )

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United States
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