BROADENING TRADE THEORY

This volume is a collection of the author's past and recent research. It concentrates on some topics that continue to be neglected in mainstream trade theory, but which have grown in empirical relevance as the decades have passed and allow us to broaden our world view. These include adding multinational firms and a major role for the demand side of general equilibrium to our conventional portfolio of models.Part I in the volume focuses on multinational firms and the incorporation of endogenous location and ownership choices into general-equilibrium trade models. A particular emphasis, repeatedly confirmed in empirical studies, is on horizontal firms that replicate activities across borders. Two chapters on the vertical integration versus outsourcing decision reveal the non-excludable property of knowledge-based assets.Part II focuses on the demand side of general equilibrium, arguing and showing empirically that non-homothetic preferences, which give an important role to per capita income, help explain many of the empirical puzzles that trade economists keep trying to explain only from the production side of general equilibrium.Part III is eclectic, but the chapters in this section share the common thread of showing how distortions and allowing trade in factors of production both modify traditional policy ideas and also create additional sources of gains from trade.Contents: About the Author Acknowledgments Introduction Adding Multinational Firms to the Theory of International Trade: Multinationals, Multi-Plant Economies, and the Gains from Trade Endogenous Market Structures in International Trade (Natura Facit Saltum) Multinational Firms and the New Trade Theory The Theory of Endowment, Intra-Industry, and Multinational Trade Estimating the Knowledge-Capital Model of the Multi-National Enterprise Export-Platform Foreign Direct Investment Multinational Firms, Technology Diffusion and Trade Contracts, Intellectual Property Rights, and Multinational Investment in Developing Countries Preferences and Per-Capita Income: Trade Theory for the Demand Side of General Equilibrium: Explaining the Volume of Trade: An Eclectic Approach Putting Per-Capita Income Back into Trade Theory International Trade Puzzles: A Solution Linking Production and Preferences Per-Capita Income and the Demand for Skills An Alternative Base Case for Modeling Trade and the Global Environment General Equilibrium with Market Imperfections and Trade Complementarities: Trade and the Gains from Trade with Imperfect Competition Factor Movements and Commodity Trade as Complements International Externalities and Optimal Tax Structures Readership: Faculty and graduate students specializing in international trade and in international macro/finance. Another academic group is those specializing in the development economics of open economies. It should also be of interest to trade and macro economists working in government ministries and in international institutions such as the World Bank, IMF, United Nations, WTO, etc.Multinational Firms;Horizontal Multinationals;Vertical Multinationals;Internalization;Vertical Integration;Outsourcing;Foreign Affiliates;Per-Capita Income;Non-homothetic Preferences;Income Elasticity of Demand;Missing Trade Puzzle;Skill Premium Puzzle;Pro-competitive Gains From Trade;Complements;Externalities0Key Features: The existing body of international trade theory is heavily weighted with an underlying world view that does not fit closely with empirical reality. This volume can be considered as a supplement to existing literature and textbooks, broadening our world view by examining neglected topics that are nevertheless of considerable empirical relevance. For example, existing literature is dominated by models of single-plant nationally-owned firms that serve foreign markets by exports. But total sales of foreign affiliates of US multinational are more than 2.5 times the value of all US exports. This motivates the fact that half the chapters in...