Why do countries trade with each other? Economists have asked this question at least since the days of David Ricardo. The old trade theory cannot explain trade among industrialized countries with similar compositions of capital and labor. That's why Paul Krugman and his generation developed the new trade theory. The new trade theory, however, fails to address a striking recent phenomena: the enormous growth of trade in intermediate goods within the multinational corporation. That's where Dalia Marin comes in with what she calls the "new new trade theory." Read more
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