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Increasing Returns and All That: A View from Trade

  • Werner Antweiler
  • Daniel Trefler

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)

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File URL: http://www.aeaweb.org/articles.php?doi=10.1257/000282802760015621
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Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 92 (2002)
Issue (Month): 1 (March)
Pages: 93-119

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Handle: RePEc:aea:aecrev:v:92:y:2002:i:1:p:93-119
Note: DOI: 10.1257/000282802760015621
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