Economic Integration Effects on Market Structure

Abstract

The way economists think about international trade and the gains of economic integration has significantly changed during the last two decades. The concept of comparative advantage, the beautiful and deep insight of David Ricardo, has not lost his theoretical relevance, and many analyses are still devoted to the way countries can exploit their differences by specializing and exchanging, and to the gains related to this inter-national and inter-industrial trade. However, several authors have come to focus on the international intra-industry trade (whose importance appears to be overwhelming in the case of developed countries), and on the role of the economies of scale in explaining it1. There are at least two reasons for this shift: first, the nowadays (and aforementioned) relevance of the intra-industry trade (for instance inside the European Union (EU)); second, the fact that some relatively recent advances in economic theory (and in particular in Industrial Organization) has eventually provided economists with the analytical tools to cope with the inherent complexities of the increasing returns economics.