1. Why need alternative theories?
   1. H-O Model
      1. based on differences in relative abundant among countries
      2. based on differences in relative intensity among goods
      3. good for explaining rich/poor countries
      4. good for
         1. inter-industry trade: exports & imports from different industries
         2. intra-industry trade: exports & imports from the same industry
      5. From poor country perspective
         1. 80% of trade is with rich countries, most of this is inter-industry trade
      6. From rich country perspective
         1. 70% of trade is with other rich countries, most of this is intra-industry trade
   2. that's why need alternative theory (aka. new trade theory)
2. Three Alternative Theories
   1. Internal Economies of Scale + Hysteresis
      1. internal economies at scale such that MES large relationship
         1. limited number of firms in world
      2. historical accident
         1. where initial firms located
            1. limited number of countries with comparative advantage located in
   2. External Economies + Hysteresis
      1. entry of new firms
         1. lower costs for all firms
      2. geography clustering
         1. + max number of clustering before market saturated
            1. maximum # of countries
         2. + historical accident
            1. specific countries
            2. comparative advantage locked in
      3. 3 main sources of external econ
         1. transportation
            1. cost will decrease if many stores
         2. marketing
            1. saving marketing costs if in the area
         3. recruiting
            1. flexible labor
         4. geographic clustering
      4. Industry starts
         1. industry expands
            1. internal econ
            2. Q ( + )at each firm
            3. external econ
            4. entry of new firms
         2. opportunity costs (-)
   3. Internal Economies & Product Differentiation
      1. critical assumptions
         1. differentiated product
         2. MES large relatively to domestic markets
         3. different dominant tastes among countries
3. Transportation Costs & Trade Patterns
   1. help explaining global trade expanding so rapidly
   2. 3 transportation revolutions
      1. 1950s
         1. shipping containers
      2. 1980s-2000
         1. miniturization
            1. products getting smaller
      3. 2000s-today
         1. digitalization
            1. services
   3. global supply chains
      1. comparative advantage in one part of a product
4. Overall Conclusions