INTERNATIONALLY DECREASING COSTS AND WORLD-TRADE

This paper seeks to reformulate the existing theory of international trade and increasing returns by arguing that such returns depend upon the size of the world market rather than national output. The result is the disappearance of the tendency towards interindustry specialization and multiple equilibrium and the emergence of a theory of trade in intermediate goods. A new analytical tool - the allocation curve - is developed for this context. © 1979.