Does Economic Geography Matter for International Specialization?

Donald R. Davis () and David Weinstein ()

No 5706, NBER Working Papers from National Bureau of Economic Research, Inc

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 of Heckscher-Ohlin-Vanek. We 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.

Date: 1996-08
Note: ITI
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Related works:
Working Paper: Does Economic Geography Matter for International Specialization? (1997)
Working Paper: Does Economic Geography Matter for International Specialization? (1996)
Working Paper: Does Economic Geography Matter for International Specialization? (1997)
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