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American Economic Review: Vol. 92 No. 1 (March 2002)

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Increasing Returns and All That: A View from Trade

Article Citation

Antweiler, Werner, and Daniel Trefler. 2002. "Increasing Returns and All That: A View from Trade ." American Economic Review, 92(1): 93-119.

DOI: 10.1257/000282802760015621

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)

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Antweiler, Werner (Faculty of Commerce and Business Administration, University of British Columbia, 2053 Main Mall, Vancouver, British Columbia, V6T 1Z2, Canada)
Trefler, Daniel (Department of Economics, University of Toronto, 140 St. George Street, Suite 707, Toronot, Ontario, M5S 3G6, Canada)


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