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Should small countries fear deindustrialization?

Author

Listed:
  • Tomasz Michalski

    (GREGH - Groupement de Recherche et d'Etudes en Gestion à HEC - HEC Paris - Ecole des Hautes Etudes Commerciales - CNRS - Centre National de la Recherche Scientifique)

  • Ai-Ting Goh

    (GREGH - Groupement de Recherche et d'Etudes en Gestion à HEC - HEC Paris - Ecole des Hautes Etudes Commerciales - CNRS - Centre National de la Recherche Scientifique)

Abstract

Will small countries deindustrialize when opening up to trade with large countries? Davis (1998) shows that for the home market effect to lead to deindustrialization of small countries, trade costs for homogenous goods must be sufficiently smaller than trade costs in differentiated goods, a condition which is not supported by empirical evidence. We show that if differentiated goods production uses tradeable inputs small countries can become deindustrialized when trading with a sufficiently large

Suggested Citation

  • Tomasz Michalski & Ai-Ting Goh, 2009. "Should small countries fear deindustrialization?," Working Papers hal-00489273, HAL.
    • Handle: RePEc:hal:wpaper:hal-00489273
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    Cited by:

    1. Ai‐Ting Goh & Tomasz Kamil Michalski, 2010. "Should Small Countries Fear Deindustrialization?," Review of International Economics, Wiley Blackwell, vol. 18(4), pages 607-617, September.
    2. Martín Tobal, 2017. "Regulatory Entry Barriers, Rent Shifting and the Home Market Effect," Review of International Economics, Wiley Blackwell, vol. 25(1), pages 76-97, February.

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    Keywords

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    JEL classification:

    • F01 - International Economics - - General - - - Global Outlook
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

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