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Market Size, Differentiated Scale Economies and Interindustry Trade

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Author Info
Roehlano M. Briones (WorldFish Center)

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Abstract

A stylized pattern of interindustry trade between developing and developed regions identifies the former as specialists in light manufactures and latter in heavy manufactures. Conventional explanations for this pattern rely on the factor proportions model, which is empirically suspect. This paper proposes an alternative model that relies on the interaction between scale economies and domestic market size. Unlike standard increasing returns analysis, the model provides a rich yet tractable characterization of variations in scale economies across industries. The model, in applying a limit pricing framework to the open economy, offers a new approach to analyzing imperfect competition and interregional trade.

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File URL: http://129.3.20.41/eps/it/papers/0412/0412006.pdf
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Publisher Info
Paper provided by EconWPA in its series International Trade with number 0412006.

Download reference. The following formats are available: HTML, plain text, BibTeX, RIS (EndNote), ReDIF
Length: 34 pages
Date of creation: 08 Dec 2004
Date of revision:
Handle: RePEc:wpa:wuwpit:0412006

Note: Type of Document - pdf; pages: 34. Explains a stylized pattern of industry specialization in international trade, by offering a new model of imperfect competition adapted from the Big Push model of Murphy, Shliefer, and Vishny (1989)
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Web page: http://129.3.20.41

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Related research
Keywords: Interindustry trade increasing returns imperfect competition

Find related papers by JEL classification:
F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies
R12 - Urban, Rural, and Regional Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Krugman, Paul, 1980. "Scale Economies, Product Differentiation, and the Pattern of Trade," American Economic Review, American Economic Association, vol. 70(5), pages 950-59, December. [Downloadable!] (restricted)
  2. Bowen, Harry P & Leamer, Edward E & Sveikauskas, Leo, 1987. "Multicountry, Multifactor Tests of the Factor Abundance Theory," American Economic Review, American Economic Association, vol. 77(5), pages 791-809, December. [Downloadable!] (restricted)
    Other versions:
  3. Hanson, Gordon H., 1996. "Agglomeration, Dispersion, and the Pioneer Firm," Journal of Urban Economics, Elsevier, vol. 39(3), pages 255-281, May. [Downloadable!] (restricted)
  4. J. Peter Neary, 2001. "Of Hype and Hyperbolas: Introducing the New Economic Geography," Journal of Economic Literature, American Economic Association, vol. 39(2), pages 536-561, June. [Downloadable!] (restricted)
  5. Hymer, Stephen H & Resnick, Stephen, 1969. "A Model of an Agrarian Economy with Nonagricultural Activities," American Economic Review, American Economic Association, vol. 59(4), pages 493-506, Part I Se. [Downloadable!] (restricted)
  6. Carl Liedholm & Donald Mead, 1987. "Small Scale Industries in Developing Countries: Empirical Evidence and Policy Implications," International Development Papers 9, Department of Agricultural Economics, Michigan State University. [Downloadable!]
  7. Deardorff, Alan V., 1984. "Testing trade theories and predicting trade flows," Handbook of International Economics, in: R. W. Jones & P. B. Kenen (ed.), Handbook of International Economics, edition 1, volume 1, chapter 10, pages 467-517 Elsevier. [Downloadable!] (restricted)
  8. 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. [Downloadable!] (restricted)
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  9. Elhanan Helpman, 1999. "The Structure of Foreign Trade," Journal of Economic Perspectives, American Economic Association, vol. 13(2), pages 121-144, Spring. [Downloadable!] (restricted)
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  10. Ranis, Gustav & Stewart, Frances, 1993. "Rural nonagricultural activities in development : Theory and application," Journal of Development Economics, Elsevier, vol. 40(1), pages 75-101, February. [Downloadable!] (restricted)
  11. Trefler, Daniel, 1995. "The Case of the Missing Trade and Other Mysteries," American Economic Review, American Economic Association, vol. 85(5), pages 1029-46, December. [Downloadable!] (restricted)
  12. Donald R. Davis & David E. Weinstein, 1998. "Economic geography and regional production structure: an empirical investigation," Staff Reports 40, Federal Reserve Bank of New York. [Downloadable!]
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  13. Fujita, Masahisa & Krugman, Paul & Mori, Tomoya, 1999. "On the evolution of hierarchical urban systems1," European Economic Review, Elsevier, vol. 43(2), pages 209-251, February. [Downloadable!] (restricted)
  14. Venables, Anthony J, 1996. "Equilibrium Locations of Vertically Linked Industries," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 37(2), pages 341-59, May.
    Other versions:
  15. Krugman, Paul, 1991. "Increasing Returns and Economic Geography," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 483-99, June. [Downloadable!] (restricted)
    Other versions:
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