The New Palgrave Dictionary of Economics

2018 Edition
| Editors: Macmillan Publishers Ltd

Gains from Trade

  • Murray C. Kemp
Reference work entry


Questions relating to the gainfulness or otherwise of international trade and investment have always interested economists, from Adam Smith to the present day. We now have at our disposal a very large arsenal of propositions concerning the trading gains of single countries and of groups of countries under alternative institutional arrangements. However, most of these propositions relate to the limiting case of small countries. For example, much ingenuity has been expended in tracking the welfare implications of autonomous changes in the world prices faced by a small country or in the vector of tariffs imposed by such a country. Evidently the fruits of such investigations are of only modest general interest. Here we concentrate on two propositions which are valid for economies of any size and which are of considerable historical and intellectual interest. For an accurate summary of small-country results, and for the relevant references to the literature, see Woodland (1982, chs 9 and 11).

This is a preview of subscription content, log in to check access.


  1. Arrow, K.J., and G. Debreu. 1954. Existence of an equilibrium for a competitive economy. Econometrica 22: 265–290.CrossRefGoogle Scholar
  2. Dixit, A.K., and V. Norman. 1980. Theory of international trade. Welwyn/Herts: J. Nisbet/Cambridge University Press.CrossRefGoogle Scholar
  3. Grandmont, J.M., and D. McFadden. 1972. A technical note on classical gains from trade. Journal of International Economics 2(2): 109–125.CrossRefGoogle Scholar
  4. Grinols, E.L. 1981. An extension of the Kemp–Wan theorem on the formation of customs unions. Journal of International Economics 11(2): 259–266.CrossRefGoogle Scholar
  5. Kemp, M.C. 1964. The pure theory of international trade. Englewood Cliffs: Prentice-Hall.Google Scholar
  6. Kemp, M.C., and N.V. Long. 1979. The under-exploitation of natural resources: A model with overlapping generations. Economic Record 55: 214–221.CrossRefGoogle Scholar
  7. Kemp, M.C., and H.Y. Wan Jr. 1972. The gains from free trade. International Economic Review 13(3): 509–522.CrossRefGoogle Scholar
  8. Kemp, M.C., and H.Y. Wan Jr. 1976. An elementary proposition concerning the formation of customs unions. Journal of International Economics 6(1): 95–97.CrossRefGoogle Scholar
  9. Kemp, M.C., and H.Y. Wan Jr. 1986a. Gains from trade with and without lumpsum compensation. Journal of International Economics 21(1–2): 99–110.CrossRefGoogle Scholar
  10. Kemp, M.C., and H.Y. Wan Jr. 1986b. The comparison of second-best equilibria: The case of customs unions. In Zeitschrift fur Nationalökonomie. Vienna: Springer.Google Scholar
  11. Malinvaud, E. 1953. Capital accumulation and efficient allocation of resources. Econometrica 21: 233–268.CrossRefGoogle Scholar
  12. Malinvaud, E. 1962. Efficient capital accumulation: A corrigendum. Econometrica 30(3): 570–573.CrossRefGoogle Scholar
  13. Mill, J.S. 1844. Essays on some unsettled questions of political economy. London: John W. Parker.Google Scholar
  14. Newbery, D.M.G., and J.E. Stiglitz. 1981. The theory of commodity price stabilization: A study in the economics of risk. Oxford: Oxford University Press.Google Scholar
  15. Torrens, R. 1821. An essay on the production of wealth. London: Longman, Hurst, Rees, Orme and Brown.Google Scholar
  16. Torrens, R. 1844. The budget. On commercial and colonial policy. London: Smith, Elder & Co.Google Scholar
  17. Woodland, A.D. 1982. International trade and resource allocation. Amsterdam: North-Holland.Google Scholar

Copyright information

© Macmillan Publishers Ltd. 2018

Authors and Affiliations

  • Murray C. Kemp
    • 1
  1. 1.