Market Access, Economic Geography, and Comparative Advantage: An Empirical Assessment
Abstract
The increasing returns revolution in trade is incomplete in an important respect there exists no compelling empirical demonstration of the role of increasing returns in determining production and trade structure. One reason is that trade patterns of the canonical increasing returns models are a consequence simply of specialization, which all theories permit. Krugman (1980) shows that increasing returns models with costs of trade economic geography do allow a simple test: home market effects of demand on production. Davis and Weinstein (1996) reject the simple Krugman (1980) model on OECD data. Here we pair the model with a richer geography structure and find evidence of the importance of increasing returns, in combination with comparative advantage, in affecting OECD manufacturing production structure. The results underscore the importance of market access in implementing models of economic geography.Download Info
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 6787.Length:
Date of creation: Nov 1998
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Handle: RePEc:nbr:nberwo:6787
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Keywords:Other versions of this item:
- Donald R. Davis & David E. Weinstein, 1998. "Market Access, Economic Geography and Comparative Advantage: An Empirical Assessment," Harvard Institute of Economic Research Working Papers 1850, Harvard - Institute of Economic Research.
- F1 - International Economics - - Trade
- D5 - Microeconomics - - General Equilibrium and Disequilibrium
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