Working Paper: NBER ID: w4389
Authors: David Hummels; James Levinsohn
Abstract: In this paper, we test some propositions about international trade flows that are derived from a model of monopolistic competition developed by Elhanan Helpman. We investigate whether the volume of trade between OECD countries is consistent with the predictions of a modal in which all trade is intra-industry trade in differentiated products. We then repeat the test with non-OECD countries. We also investigate whether the share of intra-industry trade is consistent with a more general theoretical model in which some, but not all, trade is intra-industry trade. Our results lead us to question the apparent empirical success of these models.
Keywords: monopolistic competition; international trade; intraindustry trade
JEL Codes: F1; F2
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Volume of trade (F10) | Intraindustry trade (F12) |
| Monopolistic competition model (D43) | Trade flows (F10) |
| Relative country size (R12) | Volume of trade (F10) |
| Country size dispersion (R12) | Volume of trade (F10) |