We reconsider the economics of protection with an industry subject to increasing returns. Under strong comparative disadvantage in one country, any tariff-distorted equilibrium in which both countries produce the commodity must be unstable.In general, under strong comparative disadvantage, the...

We investigate the interplay, in international trade, between comparative advantage and increasing returns to scale that are external to the firm. We focus especially on “advantage reversals,” where the country with a comparative-cost disadvantage in producing a good nevertheless is able to...