Abstract

The Heckscher-Ohlin-Samuelson (H-O-S) trade model focuses mainly on the supply side of the economy and assumes that trade takes place in homogeneous goods. According to this model, specialization of production and trade among countries are shaped by factor endowments and factor intensities. While this is a simple, logical and powerful prediction, the H-O-S model is ill equipped to explain trade in differentiated products. Similarly, it cannot explain the existence and growing importance of intra-industry trade (IIT) in agri-food products. The “New Trade Theory” developed by Helpman and Krugman (1985) focuses on economies of scale, product differentiation and imperfect competition and offers persuasive explanation of IIT. An attempt is made in this paper to provide an overview of this literature, highlight major developments since the mid 1980s and assess the overall status of product differentiation models used to analyze trade in agri-food products. While notable progress has been made since the early 1990s, a lot more needs to be done in this area. Some thoughts on future refinements of empirical product differentiation models and their applications to trade in agri-food products are provided

Keywords

Trade theory; Intra-industry trade; Product differentiation; Agri-food Trade; Trade policy

Published in

Journal of International Agricultural Trade and Development
2006, Volume: 2, number: 1, pages: 39-78

SLU Authors

• Surry, Yves

  • Department of Economics, Swedish University of Agricultural Sciences
    

UKÄ Subject classification

Agricultural Science


Permanent link to this page (URI)

https://res.slu.se/id/publ/10507