ABSTRACT
The application of models of imperfectly competitive industries from the industrial organization literature to international trade theory and the analysis of commercial policy gained widespread attention in the late 1970s and early 1980s. Models of imperfectly competitive industries continue to serve as workhorses of international trade analysis, most notably in the study of the relationship between international trade and endogenous economic growth with induced innovation by Grossman and Helpman (1991) and others. From the viewpoint of positive economics, this literature provided analytical models of intra-industry international trade based on increasing returns to scale and imperfectly competitive producer behavior. On the normative side, several papers sought to demonstrate that imperfect competition in international markets provided a rationale for national governments to intervene to increase the profits of national firms participating in international oligopolies. A growing literature applies models of imperfectly competitive world markets to the quantitative analysis of trade policy changes in computable general equilibrium versions.
