GEP Research Paper 01/10
Horizontal Intra-Industry Trade and the Growth of International Trade
Nicolas Schmitt and Zhihao Yu
This paper was subsequently published in Frontiers of Research on Intra-industry Trade,
H. Grubel, P. Lloyd and H.Lee (eds), pp.33-48, Palgrave, 2002.
Abstract
We develop a model of monopolistic competition with traded and non-traded goods to explain the significant gap between the growth rates of trade and of output. It is shown that in a model with both traded and non-traded goods, the effect of trade liberalization on the change in the share of export in total output almost doubles compared to the standard model as some non-traded goods become traded when the cost of trade decreases.
Issued in May 2001.
This paper is available in PDF format .