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External Economies of Scale and Comparative Advantage

In: International Trade and Economic Dynamics

Author

Listed:
  • Wilfred J. Ethier

    (University of Pennsylvania)

  • J. Ruffin Roy

    (University of Houston)

Abstract

We investigate the interplay, in international trade, between comparative advantage and increasing returns to scale that are external to the firm. We focus especially on “advantage reversals,” where the country with a comparative-cost disadvantage in producing a good nevertheless is able to export it because of the economies of large-scale production. We examine trade policy in such a situation, looking especially at whether that policy should aim at basic policy-regime change. Koji Shimomura was a delightful person, a warm friend, a dependable follower of sumo, and a thoroughly responsible academic. We miss him. Here we address a subject that he would have appreciated. We return to the implications of increasing returns to scale for the gains from trade and for the role of trade policy. This topic was pioneered by Frank Graham (1923).

Suggested Citation

  • Wilfred J. Ethier & J. Ruffin Roy, 2009. "External Economies of Scale and Comparative Advantage," Springer Books, in: Takashi Kamihigashi & Laixun Zhao (ed.), International Trade and Economic Dynamics, pages 37-47, Springer.
    • Handle: RePEc:spr:sprchp:978-3-540-78676-4_6
    DOI: 10.1007/978-3-540-78676-4_6
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    Cited by:

    1. Roy J. Ruffin & Wilfred J. Ethier, 2011. "Protectionism and Increasing Returns with Comparative-Cost Disadvantage," PIER Working Paper Archive 11-027, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.

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