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Increasing returns, monopolistic competition, and international trade: Revisiting gains from trade
Journal of International Economics. 2022. Vol. 137. Article 103595.
We study the canonical Krugman (1979) trade model with non-CES preferences that yield autarky at finite trade costs. We prove a non-monotone impact of gradual trade liberalization. At first, near autarky, emerging trade reduces world welfare, while at free trade it becomes large enough to be beneficial (Krugman's result). This non-monotonicity persists under heterogenous firms. The harmful small-scale trade is explained by variable markups and underpriced
imports, which become socially excessive. Unlike protectionists, we argue that “liberalization should go far”. On the other hand, we show that anti-dumping measures can be viewed as a remedy for the aforementioned imports distortion. ©
Osharin A., Verbus V., / Economics Education and Research Consortium. Series "EERC Working Paper Series". 2015. No. 15/E03.
The present paper extends the traditional Dixit and Stiglitz set-up by introducing consumers’/workers’ heterogeneity into a general equilibrium model of monopolistic competition. The model obtains a closed-form solution for a symmetric equilibrium and shows how the market outcome depends on the joint distribution of consumers’/workers’ taste and labor productivities. In contrast to the traditional framework, ...
Added: October 18, 2015
Kichko S., Kokovin S. G., Zhelobodko E. V., / Высшая школа экономики. Series WP BRP "Economics/EC". 2014. No. WP BRP 54/EC/2014.
We develop a two-factor, two-sector trade model of monopolistic competition with variable elasticity of substitution. Firms' profits and sizes may increase or decrease with market integration depending on the degree of asymmetry between countries. The country in which capital is relatively abundant is a net exporter of the manufactured good, although both firm sizes and ...
Added: April 3, 2014
Kichko S., Ushchev P., Экономический журнал Высшей школы экономики 2017 Т. 21 № 1 С. 9-31
We study the consequences of opening trade between developed and developing countries. To this end, we develop a two-factor general equilibrium model of international trade with variable markups and two countries which differ in relative factor endowments. We show that the more developed country (a country with a higher relative capital endowment) is characterized by ...
Added: March 9, 2017
Igor Bykadorov, Gorn A., Sergey Kokovin et al., Economics Letters 2015 Vol. 129 P. 35-38
Examining a standard monopolistic competition model with unspecified utility/cost functions, we find necessary and sufficient conditions on their elasticities for welfare losses from emerging trade or market expansion. Two numerical examples explain the losses: excessive or insufficient entry of firms can be aggravated by market enlargement (under unrealistic elasticities). ...
Added: March 3, 2015
Zaostrovtsev A. P., В кн. : Региональная экономика и пространственное развитие. Учебник для бакалавриата и магистратуры: в 2-х томах. Т. 1: Региональная экономика. Теория, модели и методы.: М. : Юрайт, 2014. Гл. 4. С. 210-249.
Глава содержит понятийный аппарат теорий межрегиональной и международной торговли, классические, неоклассические и новые теории и модели межрегиональной торговли, ...
Added: March 24, 2015
Bykadorov I., Ellero A., Funari S. et al., / Высшая школа экономики. Series WP BRP "Economics/EC". 2016. No. 132.
In the standard Krugman (1979) non-CES trade model, several asymmetric countries typically lose from increasing trade costs. However, all countries transiently benefit from such increase at the moment of closing trade, under almost-prohibitive trade costs (i.e., near autarky, which is possible only under non-CES preferences). In other words, during trade liberalization the first step from ...
Added: October 23, 2016
Bykadorov I., Pavel Molchanov, Sergey Kokovin, / Институт математики им. С. Л. Соболева СО РАН. Series 295/2015 "Препринты ИМ СО РАН". 2015. No. 295.
We examine the Krugman's trade model with asymmetric countries, one sector, one production factor and unspecified utility/cost functions. (i) Welfare losses from opening free trade are very unlikely, but in costly trade, losses from small decrease in trade costs are guaranteed near autarky because of market distortion. (ii) The flatter demand curve is, the smaller ...
Added: October 9, 2015
Kichko S., Sergey Kokovin, Evgeny Zhelobodko, Journal of International Economics 2014 No. 94 P. 129-142
We develop a two-factor, two-sector trade model of monopolistic competition with variable elasticity of sub- stitution. Firms' prots and sizes may increase or decrease with market integration depending on the degree of asymmetry between countries. The country in which capital is relatively abundant is a net exporter of the manu- factured good, although both rm ...
Added: June 19, 2014
Sharunova V., Aistov A., Kichko S. et al., Экономический журнал Высшей школы экономики 2015 Т. 19 № 2 С. 218-248
This paper studies how heterogeneous individuals, that differ by entrepreneurial skills
and productivity as a worker, endogenously choose their occupation (workers vs.
entrepreneurs) based on expected income comparison (wages vs. profits). Each entrepreneur runs a
firm that produces a single variety of a horizontally differentiated good under monopolistic
competition. We show that the cutoff for occupational selection between workers ...
Added: June 16, 2015
Antoshchenkova I., Bykadorov I., Математическая теория игр и ее приложения 2014 Т. 6 № 2 С. 3-31
We consider a monopolistic competition model with endogenous choice of technology in the closed economy case. The aim is to make comparative statistics of equilibrium and social optimal solutions with respect to "technological innovation"; parameter which influences on costs. Key findings: with the growth of innovation and investment in the production increase; behavior of the ...
Added: October 18, 2014
Radionov S., Pospelov I. G., HSE Economic Journal 2015 Vol. 19 No. 3 P. 386-394
We consider standard monopolistic competition models in the spirit of Dixit
and Stiglitz or Melitz with aggregate consumer's preferences defined by two well known classes of utility functions – the implicitly defined Kimball utility function
and the variable elasticity of substitution utility function. These two classes gene ralize classical constant elasticity of substitution utility function and overcome its
lack of ...
Added: October 18, 2015
Pospelov I. G., Radionov S., / Высшая школа экономики. Series WP BRP "Economics/EC". 2014. No. WP BRP 80/EC/2014 .
We consider standard monopolistic competition models with aggregate consumer's preferences defined by two well-known classes of utility functions | the Kimball utility function and the variable elasticity of substitution utility function. It is known that market equilibrium is efficient only for the special case when utility function has a constant elasticity of substitution, but ...
Added: December 4, 2014
Ошарин А.М., Аудит и финансовый анализ 2013 № 6 С. 154-160
The paper develops a one-sector model of monopolistic competition with heterogeneous consumers, which preferences depend upon their personal income. The model is used for the analysis of the mark-ups dependence on the inequality of consumers’ income distribution and average wage. The paper shows that mark-ups can ambiguously depend upon income inequality at fixed average income, ...
Added: November 14, 2013
Igor Bykadorov, Ellero A., Funari S. et al., / Università Ca' Foscari Venezia, Department of Management. Series 6/2015 "Working Paper Series". 2015. No. 6.
We study a multi-country trade model with two types of countries (big and small ones). The model generalizes the case of two countries 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 ...
Added: September 8, 2015
Bykadorov I., Kokovin S. G., Вестник НГУЭУ 2014 № 1 С. 326-337
In 2000s, Russian large retailers captured a large share of the market and obtained a significant market power. This change in the market organization may enhance or deteriorate social welfare. Public interest in this issue stimulated adoption by the Russian Parliament (State Duma) of the law against the concentration of trade in the hands of ...
Added: October 18, 2014
Osharin A., Verbus V. A., / EERC. Series "Labor markets and social policy". 2015. No. 15/03E.
The present paper extends the traditional Dixit and Stiglitz set-up by introducing consumers’ workers’ heterogeneity into a general equilibrium model of monopolistic competition. The model obtains a closed-form solution for a symmetric equilibrium and shows how the market outcome depends on the joint distribution of consumers’/workers’ taste and labor productivities. In contrast to the traditional ...
Added: March 8, 2016
Zhelobodko E. V., Sidorov A., Thisse J., Журнал Новой экономической ассоциации 2013 № 19 С. 10-26
The paper studies a market of horizontally differentiated good under increasing return to scale and exogenous number of firms. Three concepts of equilibria are compared: Cournot, Bertrand and monopolistic competition. Under fairly general assumptions on consumer’s preferences, it is shown that Lerner index is the highest in Cournot case, monopolistic competition provides the lowest one ...
Added: November 14, 2013
Shapoval S., Гончаренко В. М., Пространственная экономика 2014 № 3 С. 12-25
The article deals with the theory of monopolistic competition under demand uncertainty. The authors consider the economy with labor immobility consisting of the high-tech sector with monopolistic competition and the standard sector with perfect competition. Preferences between sectors are specified by the Cobb – Douglas production function. It is assumed that companies make output
decisions under ...
Added: January 16, 2015
Osharin A., Valery Verbus, Irina Bakunina et al., Journal of Economic Structures 2020 Vol. 9 P. 1-12
The paper develops a two-country monopolistic competition model of trade featuring country-specifc consumer tastes. The accounting for heterogeneity in tastes is achieved by assuming diferent elasticities of substitution in the CES utility function for diferent country consumers. The proposed framework extends the canonical Krugman’s approach by revealing new efects regarding markups response to consumer heterogeneity ...
Added: October 10, 2020
Ivanova V., Ushchev P., The Scandinavian Journal of Economics 2019 Vol. 121 No. 3 P. 1244-1269
Standard measures of competitive toughness fail to capture the fact that, as consumers optimize intertemporally, firms operating today compete with (yet non-existent) businesses which will be started tomorrow. We develop a two-tier CES model of dynamic monopolistic competition in which the impact of product differentiation on the market outcome depends crucially on the elasticity of ...
Added: January 9, 2018
Kichko S., Behrens K., Ushchev P., / CESifo Group Munich. Series "CESifo working paper". 2018. No. WP6965.
We develop a general equilibrium model of monopolistic competition with a traded and a nontraded sector. Using a broad class of homothetic preferences—that generate variable markups, display a simple behavior of their elasticity of substitution, and nest the ces as a limiting case— we show that trade liberalization: (i) reduces domestic markups and increases imported ...
Added: April 26, 2018
Alexander Osharin, Advances in Economics and Business 2013 Vol. 1 No. 2 P. 145-149
The paper investigates distributional effects and market structure in a one-sector model of monopolistic competition with heterogeneous consumers. By using the CES utility function depending on consumer’s personal income the paper shows how the equilibrium prices, firm size and number of firms depend upon income distribution and intensity of competition. The proposed model extends the ...
Added: November 13, 2013
Kichko S., Kokovin S. G., Zhelobodko E. V., / Austrian Institute of Economic Research, Vienna Institute for International Economic Studies, Computing Centre for Economics and Social Sciences. Series FIW "FIW Working Paper". 2013. No. 124.
We develop a two-factor, two-sector trade model of monopolistic competition with variable elasticity of substitution. Firm profit and firm size may increase or decrease with market integration depending on the degree of asymmetry between countries. The country in which capital is relatively abundant is a net exporter of the manufactured good, while both firms' size ...
Added: November 19, 2013
Bykadorov I., / Economics Education and Research Consortium. Series "EERC Working Paper Series". 2010. No. 10/03E.
In Russia the chain-stores gained a considerable market power. In the paper we combine a Dixit-Stiglitz industry with a
monopolistic retailer. The questions addressed are: Does the retailer always deteriorate welfare, prices and variety of goods?
Which market structure is worse: Nash or Stackelberg behavior? What should be the public policy in this area? ...
Added: November 17, 2013