Year: 1996
Type: report
Abstract: There are two principal theories of why countries trade: comparative advantage and increasing returns to scale.Yet there is no empirical work that assesses the relative importance of these two theories in accounting for production structure and trade.We use a framework that nests an increasing returns model of economic geography featuring "home market" effects with that ofWe employ these trade models to account for the structure of OECD manufacturing production.The data militate against the economic geography framework.Moreover, even in the specification most generous to economic geography, endowments account for 90 percent of the explainable variance, economic geography but 10 percent.
DOI: 10.3386/w5706
Authors: Donald Davis, David Weinstein
Language: English
Topic: Global trade and economics
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W2159082750