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In search of scale effects in trade and growth

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  • David K. Backus
  • Patrick J. Kehoe
  • Timothy J. Kehoe

Abstract

We look for the scale effects predicted by some theories of trade and growth based on the dynamic returns to scale that arise from learning by doing, investment in human capital, or development of new products. We find little empirical evidence of a relation between the growth rate of GDP per capita and the measures of scale implied by the theory. Restricting attention to the manufacturing sector, however, we find a significant relation between the growth rate of output per worker and the relevant scale variables. We also find that growth rates are significantly related to measures of intra-industry trade.

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Bibliographic Info

Paper provided by Federal Reserve Bank of Minneapolis in its series Staff Report with number 152.

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Date of creation: 1992
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Publication status: Published in Journal of Economic Theory (Vol. 58, No. 2, December 1992, pp. 377-409)
Handle: RePEc:fip:fedmsr:152

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Keywords: Economies of scale ; Human capital ; International trade;

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  1. Romer, Paul M, 1990. "Endogenous Technological Change," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages S71-102, October.
  2. Gene M. Grossman & Elhanan Helpman, 1991. "Quality Ladders in the Theory of Growth," NBER Working Papers 3099, National Bureau of Economic Research, Inc.
  3. Stokey, Nancy L, 1988. "Learning by Doing and the Introduction of New Goods," Journal of Political Economy, University of Chicago Press, vol. 96(4), pages 701-17, August.
  4. Rivera-Batiz, Luis A & Romer, Paul M, 1991. "Economic Integration and Endogenous Growth," The Quarterly Journal of Economics, MIT Press, vol. 106(2), pages 531-55, May.
  5. Aghion, Philippe & Howitt, Peter, 1992. "A Model of Growth through Creative Destruction," Econometrica, Econometric Society, vol. 60(2), pages 323-51, March.
  6. Gene M. Grossman & Elhanan Helpman, 1989. "Quality Ladders and Product Cycles," NBER Working Papers 3201, National Bureau of Economic Research, Inc.
  7. Romer, Paul M., 1989. "What determines the rate of growth and technological change?," Policy Research Working Paper Series 279, The World Bank.
  8. Michaely, Michael, 1977. "Exports and growth : An empirical investigation," Journal of Development Economics, Elsevier, vol. 4(1), pages 49-53, February.
  9. Paul M. Romer, 1989. "Human Capital And Growth: Theory and Evidence," NBER Working Papers 3173, National Bureau of Economic Research, Inc.
  10. Michele Boldrin & Jose A. Scheinkman, 1988. "Learning-By-Doing, International Trade and Growth: A Note," UCLA Economics Working Papers 462, UCLA Department of Economics.
  11. Edwards, Sebastian, 1989. "Openness, outward orientation, trade liberalization, and economic performance in developing countries," Policy Research Working Paper Series 191, The World Bank.
  12. Gene M. Grossman & Elhanan Helpman, 1990. "Product Development and International Trade," NBER Working Papers 2540, National Bureau of Economic Research, Inc.
  13. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
  14. Robert J. Barro, 1991. "Economic Growth in a Cross Section of Countries," NBER Working Papers 3120, National Bureau of Economic Research, Inc.
  15. Robert J. Barro & Paul M. Romer, 1991. "Economic Growth," NBER Books, National Bureau of Economic Research, Inc, number barr91-1, May.
    • Robert J. Barro & Paul Romer, 1993. "Economic Growth," NBER Books, National Bureau of Economic Research, Inc, number barr93-1, May.
  16. Clemhout, S & Wan, H Y, Jr, 1970. "Learning-by-Doing and Infant Industry Protection," Review of Economic Studies, Wiley Blackwell, vol. 37(1), pages 33-56, January.
  17. Murphy, Kevin M & Shleifer, Andrei & Vishny, Robert W, 1989. "Industrialization and the Big Push," Journal of Political Economy, University of Chicago Press, vol. 97(5), pages 1003-26, October.
  18. Romer, Paul M, 1987. "Growth Based on Increasing Returns Due to Specialization," American Economic Review, American Economic Association, vol. 77(2), pages 56-62, May.
  19. Dixit, Avinash K & Stiglitz, Joseph E, 1977. "Monopolistic Competition and Optimum Product Diversity," American Economic Review, American Economic Association, vol. 67(3), pages 297-308, June.
  20. Argote, L. & Epple, D., 1990. "Learning Curves In Manufacturing," GSIA Working Papers 89-90-02, Carnegie Mellon University, Tepper School of Business.
  21. John S. Chipman, 1970. "Induced Technical Change and Patterns of International Trade," NBER Chapters, in: The Technology Factor in International Trade, pages 95-142 National Bureau of Economic Research, Inc.
  22. Kormendi, Roger C. & Meguire, Philip G., 1985. "Macroeconomic determinants of growth: Cross-country evidence," Journal of Monetary Economics, Elsevier, vol. 16(2), pages 141-163, September.
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