New trade theory (NTT) is a collection of economic models in international trade theory which focuses on the role of increasing returns to scale and network effects, which were originally developed in the late 1970s and early 1980s. The main motivation for the development of NTT was that, contrary to what traditional trade models (or "old trade theory") would suggest, the majority of the world trade takes place between countries that are similar in terms of development, structure, and factor endowments.
Traditional trade models relied on productivity differences (Ricardian model of comparative advantage) or factor endowment differences (Heckscher–Ohlin model) to explain international trade. New trade theorists relaxed the assumption of constant returns to scale, and showed that increasing returns can drive trade flows between similar countries, without differences in productivity or factor endowments. With increasing returns to scale, countries that are identical still have an incentive to trade with each other. Industries in specific countries concentrate on specific niche products, gaining economies of scale in those niches. Countries then trade these niche products to each other – each specializing in a particular industry or niche product. Trade allows the countries to benefit from larger economies of scale.
Some have used NTT to argue that using protectionist measures to build up a large industrial base in certain promising industries will then allow those industries to dominate the world market. Less quantitative forms of a similar "infant industry" argument against free trade have been advanced by previous trade theorists.
Newtradetheory (NTT) is a collection of economic models in international tradetheory which focuses on the role of increasing returns to scale and network...
International tradetheory is a sub-field of economics which analyzes the patterns of international trade, its origins, and its welfare implications....
International trade is the exchange of capital, goods, and services across international borders or territories because there is a need or want of goods...
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completely free, trade policies. This was followed within a few years by the infant industry scenario developed by Mill promoting the theory that the government...
Some conspiracy theories contend that the collapse of the World Trade Center was not solely caused by the airliner crash damage that occurred as part...
perfect enforcement are not realized. NewTradeTheory (NTT) is the economic critique of international free trade from the perspective of increasing returns...
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contributions to newtradetheory and new economic geography. The Prize Committee cited Krugman's work explaining the patterns of international trade and the geographic...
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regulate and control them. Alongside formal economic theories of international economics, trade, and finance, which are widely utilised within the discipline...
treaty to deal with trade in goods: the General Agreement on Tariffs and Trade (GATT). International trade law is based on theories of economic liberalism...
bilateral and multilateral trade agreements with many nations and international organizations. It is a member of the World Trade Organization, part of the...
neutral and to trade with both sides, but both countries objected to American trade with the other. American policy aimed to use the new laws to avoid...
restrictions on trade. The trade-stimulation effects intended by means of economic integration are part of the contemporary economic Theory of the Second...
timeline of the history of international trade which chronicles notable events that have affected the trade between various countries. In the era before...
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