Variable Returns to Scale, Non-Uniqueness of Equilibirum and the Gains from International Trade

Abstract

Existing conditions for gainful trade under conditions of variable returns to scale are merely sufficient. Basing ourselves on the possible non-uniqueness of the production equilibrium under variable returns, we develop a globally valid necessary and sufficient condition for gainful trade. In particular, it is shown that trade may be gainful without changes in product prices, even if trade results in a loss of productivity.

Rich Nations, Poor Nations: How Much Can Multiple Equilibria Explain?

“…Additional key references includeKemp and Schweinberger (1991) andPanagariya (1981Panagariya ( , 1988.5 The empirical literature on external economies is briefly surveyed byBenhabib and Farmer (1996, p. 434-435) andFarmer (1999, p. 149-152 and 171-173) Burnside (1996). argues that much of the empirical literature suffers from severe identification problems.…”

Procompetitive Gains from Trade and Comparative Advantage

“…This property of models with increasing returns and imperfect competition can also be harnassed to achieve the derived isolation and identification of non comparative advantage gains if for given commodity prices alternative equilibria exist in a small open economy, see e.g. Kemp and Schweinberger (1991).…”

“…This entails that all the results are not truly global as in e.g. Kemp and Schweinberger (1991) . However the advantage of this assumption is obvious.…”

“…31 10 As explained in footnote (6) there are some important special cases in which controllability is satisfied. Furthermore it is implicitely assumed in virtually all the received literature (for an exception, see Kemp and Schweinberger 1991).…”

Pattern of Trade and Economic Development in a Model of Monopolistic Competition

“…Cheng, Sachs, and Yang (1998) introduce differences in technology and in transaction conditions between the countries into the HO model and conduct inframarginal analysis of jumps of equilibrium between various patterns of specialization to confirm these suggestions. Panagariya (1983), Kemp (1991), Young (1991), and others introduce variable returns to scale to refine the core theorems. Helpman and Krugman (1985) explore effects of economies of scale and monopolistic competition on trade pattern.…”