ABSTRACT
This chapter also examines another outcome of increasing returns to scale and the resulting concentration of production in the hands of a few large, imperfectly competitive producers, namely the growth of transnational corporations (TNCs). TNCs dominate international trade as well as international investment and international finance. An important question thus arises: Are the neoclassical models of international trade, which are based on the assumption of perfect competition, accurate in a world in which nearly all international trade is carried out by TNCs? In this world, does free trade maximize welfare in all countries?
