Increasing Returns To Scale, The Framework Of Endogenous Growth And The "New" Development Of The Trade Theory

The orthodox trade theory is set upon the assumption of decreasing marginal productivity of input and the framework of perfect competition market. Because of the restriction of the framework, the orthodox trade theory shows some insufficiency in such fields as intra-industry trade, the relationship between trade and growth, the dynamic progress of trade pattern. The further development of trade theory needs to introduce the factor of increasing returns to scale into the analysis of the trade theory and combine together with the dynamic research approach of the endogenous growth theory.At the end of the seventies last century, A. Dixit and J E Stiglitz set up a model to study the monopolistic competition market that is suitable for the increasing returns to scale. Thereafter, the trade theory and the growth theory have all made considerable progress, the development of the two go shoulder to shoulder and complements each other.This paper aimed at combing the evolution of the trade theory under the assumption of increasing returns to scale and the framework of endogenous growth theory. Preceding paragraph are divided into three parts: Chapter one describes the static trade model under the assumption of increasing returns to scale; Chapter two analyses the basic framework in the analysis of trade under the endogenous growth mode; Chapter three discusses the development of the trade theory under the framework of the endogenous growth research.