Decomposing the welfare gains from trade

The textbook of International Economics by Krugman, Obstfeld and Melitz (2022) introduces the gains from trade under monopolistic competition with a simple linear demand model. We use its representative consumer foundation to decompose the welfare gains from a market expansion into competitive effects, variety effects and selection effects • Complement to the textbook “International Economics” by Krugman, Obstfeld and Melitz. • A representative consumer foundation of the monopolistic competition model of Krugmal et al. (2022). • Decomposition of the welfare gains from a market expansion into competitive effects, variety effects and selection effects.