A New Trade Theory Model Research Based On Dixit-Stiglitz Model

With the development of the globalized economy and technology,trade contacts between different countries and regions are more and more frequent,whilst the relationships and trade frictions between them often become increasingly acute.Situations are that it is weak for the overall development of international trade while the anti-globalization brigade scales up but cannot promote the world economic development.This paper aims to reexamine these trade problems and to study that whether the closed trade action or the trade liberalization action is more conducive to social development by establishing an improved theoretical model,that is,the improvement of trade gains and welfare level,and that what is the fundamental motive force for a country to enhance its national interests in the long term.The field of the research is limited to the core of the Krugman new trade theory model,the D-S model,in the four classic international trade theories,and its improvement and expansion.Since the derivation of this model in the original literature is too concise and the existing literature is mostly lack of detailed explanation,we first deduce the original D-S model in detail via the two-stage maximization method,after demonstrating the feasibility of this method.The setting and hypothesis of the important parameter variables are also briefly proved and explained,and the important basic conclusions with economic significance are derived as the theoretical basis for the improved model following.Second,focusing on the limitations of Krugman's new trade theory model that only studies the situation of intra-industry trade between the developed countries with similar external conditions in the monopolistic competitive market,we relax the hypothesis of the model.By integrating the Cobb-Douglas function and the CES function,we establish the improved CD-CES model by adding the production factor and the remuneration index of the welfare to analyze five different situations from closed to open trade under the framework of the standard trade model,which makes Krugman's new trade model a special case of the new model.The new model includes inter industry trade between developed countries and developing countries and developed countries.By analyzing the changes of parameters and variables before and after trade,it is concluded that the open trade decision is more conducive to the development of the country's economy and the welfare improvement;the salary level of developed countries is higher than that of the developing countries in common;countries who produce products that have economy of scale will benefit more after the open trade,but the essential advantage for a country to be superior in trade is the absolute advantage rather than the relative advantage.Some of the conclusions can be supported by the data of the new empirical research results published in recent years.In the end,we relax the two hypothesis,which are products including the homogeneity numeraire and heterogeneous commodities and the utility function symmetry.And the new model named CES model is established,which cancels the symmetry by making the substitution of goods between groups variable.We set up two heterogeneous commodity groups,and obtain the restrictive relationships among the parameter variables through the equilibrium analysis.Then,two groups of commodities are successfully extended to multidimensional product groups,which proved that the improved model has good scalability.