Market Size, Differentiated Scale Economies and Interindustry Trade

Roehlano Briones ()

International Trade from EconWPA

Abstract: A stylized pattern of interindustry trade between developing and developed regions identifies the former as specialists in light manufactures and latter in heavy manufactures. Conventional explanations for this pattern rely on the factor proportions model, which is empirically suspect. This paper proposes an alternative model that relies on the interaction between scale economies and domestic market size. Unlike standard increasing returns analysis, the model provides a rich yet tractable characterization of variations in scale economies across industries. The model, in applying a limit pricing framework to the open economy, offers a new approach to analyzing imperfect competition and interregional trade.

Keywords: Interindustry trade; increasing returns; imperfect competition (search for similar items in EconPapers)
JEL-codes: F12 R12 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-geo
Date: 2004-12-08
Note: Type of Document - pdf; pages: 34. Explains a stylized pattern of industry specialization in international trade, by offering a new model of imperfect competition adapted from the Big Push model of Murphy, Shliefer, and Vishny (1989)
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http://129.3.20.41/eps/it/papers/0412/0412006.pdf (application/pdf)

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