The Heckscher-Ohlin model with monopolistic competition and general preferences

摘要

I extend the neoclassical 2 x 2 x 2 trade model to general preferences over a variety of goods supplied under monopolistic competition in a sector while the other sector is perfectly competitive. Non-homothetic preferences deliver pricing to market, incomplete pass-through and market size effects. Under realistic conditions, the differentiated goods are sold at a higher price in the capital-abundant country. (C) 2017 Elsevier B.V. All rights reserved.