The authors have benefited from discussions with Johannes Bröcker, Amihai Glazer, Stephan Lutz, Santanu Roy, Koji Shimomura, and the late Martin Bronfenbrenner. We have also profited from seminars at Georgetown University, Kobe University, UC-Irvine, the Western Economics Association Meetings at San Diego 2000, Hong Kong University 2002, Kiel Institute for World Economics 2002, the International Atlantic Economic Congress, Vienna 2003, and from insightful comments of the referees.
Implicit Mercantilism, Oligopoly, and Trade*
Article first published online: 4 FEB 2005
Review of International Economics
Volume 13, Issue 1, pages 165–184, February 2005
How to Cite
McGuire, M. C. and Ohta, H. (2005), Implicit Mercantilism, Oligopoly, and Trade. Review of International Economics, 13: 165–184. doi: 10.1111/j.1467-9396.2005.00497.x
- Issue published online: 4 FEB 2005
- Article first published online: 4 FEB 2005
The authors propose a new model of trade between developing and advanced economies to capture the effects of important asymmetries in the organizations of their industries. This model demonstrates how the industrial structure of a developing economy can evolve to produce what the authors call “implicit mercantilism.” Free entry plus domestic oligopoly in a developing economy, when combined with competitive behavior in developed countries, generates several distinct stages of mercantilism hitherto unrecognized in the literature. Each stage has its own pattern of interaction with a competitive trading world. As the production costs and techniques of the mercantile society converge to world standards, its citizens will first lose from this progress, only later to gain. Both effects are due to certain relationships between home prices and world prices, newly identified in this paper. The analysis is particularly relevant to the structure of Asian economies, and to policy debates about their reform.