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...

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...

We explore the impact of reciprocal, specific or ad valorem, import tariffs on welfare among N symmetric countries (a free-trade agreement)—using the standard Krugman’s one-sector trade model, with unspecified variable-elasticity preferences (mostly under decreasing elasticity of utility)....

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...