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  5. Alternative Sources of the Gains from International Trade: Variety, Creative Destruction, and Markups

Alternative Sources of the Gains from International Trade: Variety, Creative Destruction, and Markups

  • Robert C. Feenstra
Journal of Economic Perspectives
vol. 32, no. 2, Spring 2018
(pp. 25-46)
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Abstract

The modern theory of international trade identifies several additional sources of the gains from international trade beyond the gains from traditional comparative advantage. These are the gains from importing new product varieties; the gains from "creative destruction" as the relatively most productive firms expand their output by exporting while the less-productive firms exit; and the gains from competition between firms in different countries, which can lead to reduced markups. Estimates of these various gains are provided for the United States and other countries.

Citation

Feenstra, Robert C. 2018. "Alternative Sources of the Gains from International Trade: Variety, Creative Destruction, and Markups." Journal of Economic Perspectives, 32 (2): 25-46. DOI: 10.1257/jep.32.2.25

Additional Materials

JEL Classification

  • D21 Firm Behavior: Theory
  • F11 Neoclassical Models of Trade
  • F14 Empirical Studies of Trade
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