Should small countries fear deindustrialization ?
AbstractWill small countries deindustrialize when opening up to trade with large countries? Davis(1998) shows that for the home market e¤ect to lead to deindustrialization of small countries, trade costs for homogenous goods must be su¢ ciently smaller than trade costs in di¤erentiated goods, a condition which is not supported by empirical evidence. We show that if di¤erentiated goods production uses tradeable inputs small countries can become deindustrialized when trading with a su¢ ciently large country and if trade costs are low.
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Bibliographic InfoPaper provided by HEC Paris in its series Les Cahiers de Recherche with number 916.
Length: 24 pages
Date of creation: 19 Mar 2009
Date of revision:
home market e¤ect; deindustrialization; trade costs; economic geography; intermediate goods;
Other versions of this item:
- Ai-Ting Goh & Tomasz Kamil Michalski, 2010. "Should Small Countries Fear Deindustrialization?," Review of International Economics, Wiley Blackwell, Wiley Blackwell, vol. 18(4), pages 607-617, 09.
- F01 - International Economics - - General - - - Global Outlook
- R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
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