Alternative Theories of Trade, International Economics, Assignment Help

International Economics - Alternative Theories of Trade, International Economics,

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Alternative Theories of Trade

The Heckscher-Ohlin theory of international trade is regarded by far the most widely acknowledged and a well established theory of trade. This theory does not account for all the factors that govern the international trade. Some economists have attempted to develop trade theories to fill the gaps in the Heckscher-Ohlin model. Some authors discuss such theories under 'alternative theories of trade, and some under 'complementary theo­ries of trade'. The trade theories of this category are not complete in themselves. They do not provide an alternative explanation to international trade. Nor do they, complement the Heckscher-Ohlin theory: some of them even tend to contradict it. They do however make important contributions to our understanding of the com­plex phenomenon of international trade. Therefore, they deserve a discussion for ' whatever worth they are. The alternative theories of trade discussed here account for the following factors:

(i)      Economies of scale,

(ii)     Spillover Effect (Linders' theory),

(iii)    Monopolistic competition and product differentiation,

(iv)    Technological change, imitation gap and product cycle. 

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