In an ultra-globalized industry, all existing firms service all markets (beyond partitioning and back to Krugman's world). Moreover, intense competition may force firms with low productivity to compensate for losses at the home market with profits made on foreign markets. This raises the question: are there still gains from further trade liberalization in such a situation? We present a simple and tractable heterogeneous firms specification to address this question. The answer we find is this: yes, even more.

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Keywords Heterogeneous firms, Intra-industry trade, Monopolistic competition
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Journal Review of World Economics
Jørgensen, J.G. (Jan G.), Schröder, P.J.H. (Philipp J.H.), & Yu, Z. (2012). Globalization beyond partitioning: Back to Krugman's world. Review of World Economics, 148(1), 73–87. doi:10.1007/s10290-011-0111-0