ABSTRACT
This chapter concerns only with the orthodox theory. This does not mean that the peripheral literature is not important. One would include, then, a peripheral literature that has not been integrated in the orthodox theory. Trade theorists would, indeed, have been excessively naive if they had failed to allow for such an obvious feature of the world. General equilibrium trade theory does not allow for oligopoly or monopoly. Some simple theorems in orthodox trade theory focus on Pareto-efficiency, hence ignoring income distribution. Indeed it is true of a large body of the literature which assumes that government policy brings about costlessly a desired income distribution. The main point that emerged was the crucial role of taxation: a gain is likely when, as is usual, the profits are taxed by the government of the capital-receiving country, and provided this is not offset by subsidies. Government restrictions and taxes, such as tariffs and profit taxes, do not affect the corporation's location decisions.
