MONOPOLISTIC COMPETITION AND INTERNATIONAL-TRADE - RECONSIDERING THE EVIDENCE

We test some propositions about international trade flows that are der ived from models of monopolistic competition developed by Elhanan Help man and Paul Krugman. We investigate whether the volume of trade betwe en OECD countries is consistent with the predictions of a model in whi ch all trade is intraindustry trade in differentiated products. We the n repeat the test with non-OECD countries. We also investigate whether the share of intraindustry trade is consistent with a more general th eoretical model in which some, but not all, trade is intraindustry tra de. Our results lead us to question the apparent empirical success of these models.