International Trade, Migration and Investment with Horizontal Product Differentiation and Free Entry and Exit of Firms

Revista de Economía del Rosario, Vol. 9, No. 2, December 2006

14 Pages Posted: 18 Jan 2007

Abstract

This paper builds a circular road model of the world with horizontal product differentiation and free entry and exit of firms, to show that freer international trade increases welfare - with ideal variety preferences - through the exploitation of economies of scale and better allocative efficiency, that all participating countries gain from trade, and that smaller countries have more to win from free trade than larger countries. Political resistance to trade liberalization, international migration and foreign direct investment are also analyzed with the model. Finally, the model provides a microfoundation for the use of demand curves with constant and negative slopes.

Keywords: monopolistic competition, horizontal product differentiation, international

JEL Classification: F12, F13

Suggested Citation

Vallejo, Hernan, International Trade, Migration and Investment with Horizontal Product Differentiation and Free Entry and Exit of Firms. Revista de Economía del Rosario, Vol. 9, No. 2, December 2006, Available at SSRN: https://ssrn.com/abstract=957362

Hernan Vallejo (Contact Author)

Universidad de los Andes ( email )

Carrera 1a No. 18A-10
Bogota
Colombia
57-1-3394949 (Phone)
57-1-3324492 (Fax)

HOME PAGE: http://economia.uniandes.edu.co/vallejo

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
60
Abstract Views
475
rank
427,342
PlumX Metrics