TITLE:
The Role of Intra-National Trade in Trade Theory
AUTHORS:
Yong He, Guangzhen Sun
KEYWORDS:
Intra-National and International Trade, Heterogeneous Firm Model, Market Selection, Comparative Advantage
JOURNAL NAME:
Theoretical Economics Letters,
Vol.12 No.6,
December
27,
2022
ABSTRACT: This paper explores the implications arising from
the heterogeneous firm model for a theory of trade in which intranational
trade is an intrinsic part, and international
trade is its extension. Due to market competition, intranational trade dynamically leads
to an increase in productivity heterogeneity across firms, which strengthens
market selection and makes allocation more efficient. It also strengthens
comparative advantage, and thus stimulates international trade.