Monopolistic Competition, Optimum Product Diversity, and International Trade - the Role of Factor Endowment and Factor Intensities

In this paper we revisit the influential theory of monopolistic competition and optimum product variety as developed by Dixit Stiglitz (1977) with applications in international trade Krugman (1979,1980), modeling fixed variable costs production terms underlying use skilled unskilled labor a single good model. This is different from earlier work on multi sector variant cum Heckscher-Ohlin-Samuelson model such Helpman (1981) others. our structure factor endowment intensities determine both number varieties output per closed economy mimicking features Differences endowments across countries pattern between variety, which indeterminate standard Dixit-Stiglitz-Krugman Later reflect wage inequality unemployment providing some interesting results.