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In search of scale effects in trade and growth

  • David K. Backus
  • Patrick J. Kehoe
  • Timothy J. Kehoe

We look for the scale effects predicted by some theories of trade and growth based on the dynamic returns to scale that arise from learning by doing, investment in human capital, or development of new products. We find little empirical evidence of a relation between the growth rate of GDP per capita and the measures of scale implied by the theory. Restricting attention to the manufacturing sector, however, we find a significant relation between the growth rate of output per worker and the relevant scale variables. We also find that growth rates are significantly related to measures of intra-industry trade.

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Paper provided by Federal Reserve Bank of Minneapolis in its series Staff Report with number 152.

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Date of creation: 1992
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Publication status: Published in Journal of Economic Theory (Vol. 58, No. 2, December 1992, pp. 377-409)
Handle: RePEc:fip:fedmsr:152
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  1. Kormendi, Roger C. & Meguire, Philip G., 1985. "Macroeconomic determinants of growth: Cross-country evidence," Journal of Monetary Economics, Elsevier, vol. 16(2), pages 141-163, September.
  2. Paul Romer, 1989. "Endogenous Technological Change," NBER Working Papers 3210, National Bureau of Economic Research, Inc.
  3. Gene M. Grossman & Elhanan Helpman, 1991. "Quality Ladders and Product Cycles," The Quarterly Journal of Economics, Oxford University Press, vol. 106(2), pages 557-586.
  4. John S. Chipman, 1970. "Induced Technical Change and Patterns of International Trade," NBER Chapters, in: The Technology Factor in International Trade, pages 95-142 National Bureau of Economic Research, Inc.
  5. Gene M. Grossman & Elhanan Helpman, 1989. "Quality Ladders in the Theory of Growth," NBER Working Papers 3099, National Bureau of Economic Research, Inc.
  6. Paul M. Romer, 1989. "Human Capital And Growth: Theory and Evidence," NBER Working Papers 3173, National Bureau of Economic Research, Inc.
  7. 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.
  8. Gene M. Grossman & Elhanan Helpman, 1988. "Product Development and International Trade," NBER Working Papers 2540, National Bureau of Economic Research, Inc.
  9. Argote, L. & Epple, D., 1990. "Learning Curves In Manufacturing," GSIA Working Papers 89-90-02, Carnegie Mellon University, Tepper School of Business.
  10. Romer, Paul M., 1989. "What determines the rate of growth and technological change?," Policy Research Working Paper Series 279, The World Bank.
  11. Luis A. Rivera-Batiz & Paul M. Romer, 1991. "Economic Integration and Endogenous Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 106(2), pages 531-555.
  12. Dixit, Avinash K & Stiglitz, Joseph E, 1975. "Monopolistic Competition and Optimum Product Diversity," The Warwick Economics Research Paper Series (TWERPS) 64, University of Warwick, Department of Economics.
  13. Sebastian Edwards, 1989. "Openness, Outward Orientation, Trade Liberalization and Economic Performance in Developing Countries," NBER Working Papers 2908, National Bureau of Economic Research, Inc.
  14. Robert J. Barro, 1989. "Economic Growth in a Cross Section of Countries," NBER Working Papers 3120, National Bureau of Economic Research, Inc.
  15. Aghion, P. & Howitt, P., 1989. "A Model Of Growth Through Creative Destruction," Working papers 527, Massachusetts Institute of Technology (MIT), Department of Economics.
  16. Stokey, Nancy L, 1988. "Learning by Doing and the Introduction of New Goods," Journal of Political Economy, University of Chicago Press, vol. 96(4), pages 701-17, August.
  17. repec:oup:restud:v:37:y:1970:i:1:p:33-56 is not listed on IDEAS
  18. Michele Boldrin & Jose A. Scheinkman, 1988. "Learning-By-Doing, International Trade and Growth: A Note," UCLA Economics Working Papers 462, UCLA Department of Economics.
  19. repec:nbr:nberbk:barr91-1 is not listed on IDEAS
  20. Michaely, Michael, 1977. "Exports and growth : An empirical investigation," Journal of Development Economics, Elsevier, vol. 4(1), pages 49-53, February.
  21. S. Clemhout & H. Y. Wan, 1970. "Learning-by-Doing and Infant Industry Protection," Review of Economic Studies, Oxford University Press, vol. 37(1), pages 33-56.
  22. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
  23. repec:oup:restud:v:58:y:1991:i:1:p:43-61 is not listed on IDEAS
  24. repec:nbr:nberbk:barr93-1 is not listed on IDEAS
  25. Romer, Paul M, 1987. "Growth Based on Increasing Returns Due to Specialization," American Economic Review, American Economic Association, vol. 77(2), pages 56-62, May.
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