Trade and Trade Policy with Differentiated Products: A Chamberlinian-Ricardian Model: A Comment
8 Pages Posted: 9 Mar 2007
Date Written: March 2007
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.
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