Monopolistic Competition and International Trade: Reconsidering the Evidence
David L. Hummels
Purdue University - Department of Economics; National Bureau of Economic Research (NBER)
James A. Levinsohn
University of Michigan; National Bureau of Economic Research (NBER)
NBER Working Paper No. w4389
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.
Number of Pages in PDF File: 41
Date posted: July 29, 2000
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