Market Structure and Foreign Trade: Increasing Returns, Imperfect Competition, and the International Economy [Paperback]

Elhanan Helpman (Author), Paul Krugman (Author)

Book Description

ISBN-10: 026258087X | ISBN-13: 978-0262580878 | Publication Date: February 6, 1987

Market Structure and Foreign Trade presents a coherent theory of trade in the presence of market structures other than perfect competition. The theory it develops explains trade patterns, especially of industrial countries, and provides an integration between trade and the role of multinational enterprises.Relating current theoretical work to the main body of trade theory, Helpman and Krugman review and restate known results and also offer entirely new material on contestable markets, oligopolies, welfare, and multinational corporations, and new insights on external economies, intermediate inputs, and trade composition.Elhanan Helpman is Professor of Economics at Tel Aviv University. Paul Krugman is Professor of Economics at MIT

Editorial Reviews

Review

"This book is a very substantial research monograph which, as one would expect from the authors, addresses fundamentally important and interesting questions with analytical elegance and clear exposition. It will be required reading for trade theorists and those seeking to become such." Journal of Economic Literature

About the Author

Elhanan Helpman is Professor of Economics at Harvard University, the Archie Sherman Chair Professor of International Economic Relations in the Eitan Berglas School of Economics at Tel-Aviv University, and a Fellow at the Canadian Institute for Advanced Research. Paul Krugman is Professor of Economics and International Affairs at Princeton University and a New York Times columnist. He was awarded the Nobel Prize for Economics in 2008.

Product Details

• Paperback: 288 pages
• Publisher: The MIT Press (February 6, 1987)
• Language: English
• ISBN-10: 026258087X
• ISBN-13: 978-0262580878
• Product Dimensions: 9 x 5.9 x 0.7 inches
• Shipping Weight: 13.6 ounces (View shipping rates and policies)
• Average Customer Review: 5.0 out of 5 stars  See all reviews (2 customer reviews)
• Amazon Best Sellers Rank: #1,044,060 in Books (See Top 100 in Books)

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Most Helpful Customer Reviews

9 of 10 people found the following review helpful:

5.0 out of 5 stars Unavoidable, June 21, 2000

By A Customer

This review is from: Market Structure and Foreign Trade: Increasing Returns, Imperfect Competition, and the International Economy (Paperback)

If you want an introduction to international economics this book is not what you would want. If, on the other hand, you need both the key concepts of classical trade theory and a comprehensive overview of the issues of new trade theory, all nice and neat in unified notation, this book is a must.

1 of 1 people found the following review helpful:

5.0 out of 5 stars Can you hear me, Stockholm? Or what new trade theory is all about, September 29, 2011

By 

Arne123 (Kairo, Cairo, Le Caire) - See all my reviews

This review is from: Market Structure and Foreign Trade: Increasing Returns, Imperfect Competition, and the International Economy (Paperback)

Why do countries trade with each other? What determines the patterns of trade? At the end of the 1970s, these old questions caused increasing unease among a few economists. Surely, classical and neoclassical approaches could well explain inter-industry trade flows between countries that were different, either in sectoral productivities or factor endowments: Japan imports bananas and exports cars, Brazil exports mangoes and imports machinery. So far, so good. But what about trade flows between industrialized countries, which by far dominated global trade? How should intra-industry trade be explained? And why have multinational companies become so important? Ad hoc explanations abounded, but usually failed to provide adequate answers. Moreover, certain assumptions of traditional trade models, such as full competition at the international level, seemed inappropriate at least for some markets.

New trade theory was the answer to this long-standing undercurrent of discontent, and Paul Krugman (then the wunderkind of the MIT's economics department, now Princeton and New York Times) and Elhanan Helpman (formerly Tel Aviv University, now Harvard) were among the spearheads of this approach. In particular, new trade theory breaks with traditional analysis by relaxing the assumption of constant returns to scale and assuming imperfect competition in understanding how the international economy works. While in the early 1980s many special models proliferated, seemingly incompatible with traditional trade theory, but also with each other, this book for the first time provided an integrated theoretical approach. In fact, it offers MIT-style "minimum necessary" modelling at its best, such as mirror-image factor endowments in an Edgeworth box, or the use of Lancaster-type preferences in a trade model. Despite these innovative assumptions, there's no news but the old news with regard to some basic insights of older trade models; comparative advantage is alive and kicking, as is the role of factor endowments. What is surprising from a methodological perspective in this opus magnum is the amount of creative silliness, combined with intellectual rigour and discipline. It was thus less surprising that Stockholm heard, at least for Paul Krugman, who was awarded the Nobel prize in 2008.

Thanks to monographs like this one, the question "Why do countries trade with each other?" is still a fascinating one nearly two-hundred years after the publication of Ricardo's Principles. When I used some of the book's theoretical key statements for empiricial work in my PhD thesis, it was at the frontier of economic research (the book, not my goddam thesis). Now, it no longer is - its findings have been mainstreamed into economic theory textbooks. Still, this book is no beachtowel read for those who want to get a glimpse of modern economic theory, and even advanced students may initially find it inaccessible. However, those who diligently work their way through it will be richly rewarded: You wish to know about the impact of: China's integration into the world economy? Trade effects of multinational companies? Outsourcing of labour-intensive production stages to developing countries? It's all in! When I (6 ft 5) read Krugman's works on trade issues first, I immediately noticed the difference between a tall and a great economist. After a second read of this monograph many years on, I realized what it actually is: a masterpiece at 25!