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Please use this identifier to cite or link to this item: http://hdl.handle.net/10400.5/2541

Title: Trade based on economies of scale under monopolistic competition: a clarification of Krugman's model
Authors: Leão, Emanuel R.
Leão, Pedro R.
Keywords: Krugman
intra-industry trade
economies of scale
monopolistic competition
Issue Date: 2009
Publisher: ISEG – Departamento de Economia
Citation: Leão, Emanuel R. e Pedro R. Leão. 2009. "Trade based on economies of scale under monopolistic competition: a clarification of Krugman's model". Instituto Superior de Economia e Gestão - DE Working papers nº 10-2009/DE/UECE
Series/Report no.: DE Working papers nº 10-2009/DE/UECE;DE Working papers nº 10-2009/DE/UECE
Abstract: Although a major contribution to trade theory, Krugman's 1979 demonstration that 'trade can arise and lead to mutual gains even when countries are similar' fails to make explicit the economic mechanisms that lead up to this result. The current paper attempts to fill this gap by addressing several questions that are implicit in Krugman's demonstration but which he does not explicitly analyze: - What is the effect of trade upon the demand curve faced by the typical firm in each nation? -How do firms react to the change in the demand curves they face, and what is the short-term outcome of their behaviour? Why do some firms fail? What is the role of the failure of firms in the adjustment to the final free trade equilibrium?
URI: http://hdl.handle.net/10400.5/2541
ISSN: 0874-4548
Publisher version: http://aquila2.iseg.utl.pt/aquila/getFile.do?method=getFile&fileId=94472
Appears in Collections:UECE - Documentos de Trabalho / UECE - Working Papers
DE - Documentos de trabalho / Working Papers

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