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Market Size, Differentiated Scale Economies and Interindustry Trade

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  • Roehlano M. Briones

    (WorldFish Center)

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://128.118.178.162/eps/it/papers/0412/0412006.pdf
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Bibliographic Info

Paper provided by EconWPA in its series International Trade with number 0412006.

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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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Keywords: Interindustry trade; increasing returns; imperfect competition;

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  2. Krugman, Paul, 1991. "Increasing Returns and Economic Geography," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 483-99, June.
  3. Murphy, Kevin M. & Shleifer, Andrei & Vishny, Robert W., 1989. "Industrialization and the Big Push," Scholarly Articles 3606235, Harvard University Department of Economics.
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  12. Liedholm, Carl & Mead, Donald C., 1987. "Small Scale Industries in Developing Countries: Empirical Evidence and Policy Implications," Food Security International Development Papers 54062, Michigan State University, Department of Agricultural, Food, and Resource Economics.
  13. Hanson, Gordon H., 1996. "Agglomeration, Dispersion, and the Pioneer Firm," Journal of Urban Economics, Elsevier, vol. 39(3), pages 255-281, May.
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  16. 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.
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