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Trade policy and market structure
Book reviews
187
somewhat this reviewer’s satisfaction with two otherwise very good additions to the ever-increasing literature on international debt. Marcello de Cecco University of Rome, La Sapienza
Elhanan Helpman and Paul Krugman, Trade Policy and Market Structure (MIT Press, Cambridge, MA) pp. 191, $24.95. Helpman
new book follows their earlier work, Market Trade, which focused on the positive theory of trade
and Krugman’s
Structure and Foreign
with imperfect competition and increasing returns to scale. The present volume extends the earlier work into the normative analysis of trade policy. On the whole, the book is very clear and easy to read. Two short, introductory chapters state the problem and review the effects of tariffs and quotas in competitive economies. Chapters 3 and 4 then consider the very simple cases of an economy with a single domestic monopolist facing competitive foreign supply (chapter 3), and a competitive economy facing a foreign monopolist (chapter 4). These two simple, largely non-strategic models are very valuable and well presented. They serve the purpose of building our understanding of the basic issues, including the new roles for protection and subsidies, the role of conjectures, and the asymmetric effects of tariffs and quotas. Chapters 5 and 6 then turn to the more complicated cases where there are firms in both the home and foreign countries. Chapter 5 focuses on strategic export policy and chapter 6 on strategic import policy. The focus is on contrasting Cournot versus Bertrand behavior, and on tariffs versus quotas, with little attention to other determinants of market structure and conduct. Chapter 7 is entitled ‘Intra-Industry Trade’, and reviews monopolistic competition models. Here again the authors begin nicely with a simple model, and then introduce various complications and anomalous results derived in the literature. The final chapter on quantification gives an excellent statement of the difficulties of empirical research and a very clear discussion of the major modelling choices that must be made. My only quibble here is that the useful back-of-the-envelope studies of Dixit and of Baldwin and Krugman each get much more attention than the far more substantial work of Richard Harris. The exposition is excellent from a pedagogic point of view. The authors work hard on expositing the basic ideas with good results. We are left with clear and simple intuition. Complications are then introduced one by one. I must admit that I am now better able to understand some articles that were previously not entirely clear. A difficulty does develop in that it is almost
187
somewhat this reviewer’s satisfaction with two otherwise very good additions to the ever-increasing literature on international debt. Marcello de Cecco University of Rome, La Sapienza
Elhanan Helpman and Paul Krugman, Trade Policy and Market Structure (MIT Press, Cambridge, MA) pp. 191, $24.95. Helpman
new book follows their earlier work, Market Trade, which focused on the positive theory of trade
and Krugman’s
Structure and Foreign
with imperfect competition and increasing returns to scale. The present volume extends the earlier work into the normative analysis of trade policy. On the whole, the book is very clear and easy to read. Two short, introductory chapters state the problem and review the effects of tariffs and quotas in competitive economies. Chapters 3 and 4 then consider the very simple cases of an economy with a single domestic monopolist facing competitive foreign supply (chapter 3), and a competitive economy facing a foreign monopolist (chapter 4). These two simple, largely non-strategic models are very valuable and well presented. They serve the purpose of building our understanding of the basic issues, including the new roles for protection and subsidies, the role of conjectures, and the asymmetric effects of tariffs and quotas. Chapters 5 and 6 then turn to the more complicated cases where there are firms in both the home and foreign countries. Chapter 5 focuses on strategic export policy and chapter 6 on strategic import policy. The focus is on contrasting Cournot versus Bertrand behavior, and on tariffs versus quotas, with little attention to other determinants of market structure and conduct. Chapter 7 is entitled ‘Intra-Industry Trade’, and reviews monopolistic competition models. Here again the authors begin nicely with a simple model, and then introduce various complications and anomalous results derived in the literature. The final chapter on quantification gives an excellent statement of the difficulties of empirical research and a very clear discussion of the major modelling choices that must be made. My only quibble here is that the useful back-of-the-envelope studies of Dixit and of Baldwin and Krugman each get much more attention than the far more substantial work of Richard Harris. The exposition is excellent from a pedagogic point of view. The authors work hard on expositing the basic ideas with good results. We are left with clear and simple intuition. Complications are then introduced one by one. I must admit that I am now better able to understand some articles that were previously not entirely clear. A difficulty does develop in that it is almost