Chapter 3 Comparative Advantage and Trade Liberalization in a Chamberlinian–Ricardian Model

Purpose – The present note shows the interaction between technological differences between countries and the level of trade costs as a determinant of trade patterns. Methodology/approach – It takes the work of Kikuchi et al.'s (2008) Chamberlinian–Ricardian model as its point of departure, and extends the analysis to include both a continuum of industries, as did Dornbusch et al. (1977), and iceberg transport costs. Findings – It will be shown that trade liberalization drastically changes the nature of trade patterns, particularly the emergence of intra-industry trade. Originality/value – This present model extends the Chamberlinian–Ricardian model to include positive trade costs.