Pro-Competitive Effects and Harmful Trade Liberalization in Multi-Country World

Abstract

We study a multi-country trade model with two types of countries (big and small ones). The model generalizes the case of two countries analyzed in [Bykadorov I., Molchanov P., Kokovin S. (2015), “Elusive Pro-competitive Effects and Harm from Gradual Trade Liberalization, “Preprint 295, Sobolev Institute of Mathematics SB RAS, Novosibirsk, February 2015] and wonder whether there could be harm from trade. Monopolistic competition, iceberg type trade costs and variable elasticity of substitution (VES) are among the model assumptions. The effects of trade liberalization on price, production and welfare are analyzed, in cases of free trade and autarky.

Keywords: Monopolistic competition trade model, variable elasticity of substitution, iceberg type trade costs, free trade, autarky.

JEL Classification: F12, L13, D43