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Increasing Returns and All That: A View from Trade

Author

Listed:
  • Werner Antweiler
  • Daniel Trefler

Abstract

Do scale economies help to explain international trade flows? Using a large database on output, trade flows, and factor endowments, we find that allowing for the presence of increasing returns to scale in production significantly increases our ability to predict international trade flows. In particular, using trade data, we find that a third of all goods-producing industries are characterized by increasing returns to scale. Thus, scale economies are a quantifiable and important source of comparative advantage. (JEL F11, F12, D2)

Suggested Citation

  • Werner Antweiler & Daniel Trefler, 2002. "Increasing Returns and All That: A View from Trade," American Economic Review, American Economic Association, vol. 92(1), pages 93-119, March.
  • Handle: RePEc:aea:aecrev:v:92:y:2002:i:1:p:93-119
    Note: DOI: 10.1257/000282802760015621
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation

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