This paper reviews some puzzling economic aspects of globalisation and argues that they cannot be satisfactorily addressed in perfectly or monopolistically competitive models. Drawing on recent work, a model of oligopoly in general equilibrium is sketched. The model ensures theoretical consistency by assuming that firms are large in their own markets but small in the economy as a whole, and ensures tractability by assuming quadratic preferences defined over a continuum of goods. Applications considered include the effects of trade liberalisation on industrial structure, on cross-border merger waves, and on the distribution of income between skilled and unskilled workers.
JEL Codes: D50, L13, F12
Keywords: Cross-border mergers; GOLE (General Oligopolistic Equilibrium); market integration; trade and wages; trade liberalisation.
Published in Journal of the European Economic Association, 1:2-3, April-May 2003, 245-271.
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