Working Paper: NBER ID: w1957
Authors: Paul Krugman
Abstract: This paper reviews recent work on the relationship between industrial \norganization and international trade. Five strands in the theoretical \nliterature are discussed. First is the role of economies of scale \nas a cause of intra-industry trade, modelled using monopolistic competition. \nSecond is the effect of tariffs and quotas on domestic market \npower. Third is the analysis of dumping as international price discrimination. \nFourth is the potential strategy role of government policy as an \naid to domestic firms in oligopolistic competition. Finally, the paper \ndiscusses recent work that may provide a new argument for protectionism. \nA concluding section discusses recent efforts at quantification of new \ntrade theory.
Keywords: industrial organization; international trade; monopolistic competition; trade policy; dumping
JEL Codes: F1; L1
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| economies of scale (F12) | intra-industry trade (F14) |
| tariffs and quotas (F13) | domestic market power (D42) |
| domestic pricing strategies (L11) | international trade dynamics (F10) |
| government actions (H11) | domestic firms in oligopolistic markets (L13) |
| market structure (D49) | rationale for trade barriers (F14) |