Profit and Profit and Externalities as a Basis for International Trade: Several Countries and Several Commodities

Abstract:     
In the world trading system, there is a trade of differentiated products among countries due to their specialization in the same line of production. However, in two-by-two models two countries cannot specialize in the same line of production except for strategic reasons and necessarily gain from trade. This article extends to several countries and several commodities the international trade model based on profit and profit and externalities. In bilateral trade between several countries, two countries' firms can specialize in the same line of production, but the two trading partners may not necessarily gain from trade.

Number of Pages in PDF File: 31

Keywords: Trade theory, differentiated products, comparative profit advantage, profit and externalities, specialization

JEL Classification: F01, F12

working papers series