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.