Publications
Publications
- June 1996 (Revised November 1996)
- HBS Case Collection
Economic Gains from Trade, The: Theories of Strategic Trade
Abstract
The theory of competitive advantage is one of the most widely accepted economic principles among economists. The theory, as well as substantial historical evidence, suggest that free trade raises national income, while government intervention in trade relations generally lowers a nation's wealth. In the last few years, however, new theories have led some commentators to question this conclusion. Based on research into imperfectly competitive industries, some of the new theoretical research suggests that it is possible to increase national wealth with specific types of government intervention in trade relations. The research is referred to as the New International Economics, or Strategic Trade theory. While interesting, these trade theories are often misunderstood and used inappropriately. This note introduces four strategic theories of trade. Also discusses several critiques of these theories. A rewritten version of an earlier note.
Keywords
Citation
Kennedy, Robert E. "Economic Gains from Trade, The: Theories of Strategic Trade." Harvard Business School Background Note 796-184, June 1996. (Revised November 1996.)