Grounded by Gravity: A Well-Behaved Trade Model with Industry-Level Economies of Scale

Konstantin Kucheryavyy, Gary Lyn and Andres Rodriguez-Clare

American Economic Journal: Macroeconomics, 2023, vol. 15, issue 2, 372-412

Abstract: We propose a model to study the role of industry-level external economies of scale in open economies. If the elasticity governing the strength of external economies is below the inverse of the trade elasticity in each industry, then specialization under frictionless trade is consistent with comparative advantage, the model is tractable even with trade frictions, and all countries gain from trade. External economies lower gains from trade except if the country specializes in industries with high scale economies, and they amplify the gains from further trade liberalization except if it leads to specialization in industries with low scale economies.

JEL-codes: D24 F11 F12 F13 (search for similar items in EconPapers)
Date: 2023
References: View complete reference list from CitEc
Citations: View citations in EconPapers (16)

Downloads: (external link)
https://www.aeaweb.org/doi/10.1257/mac.20190156 (application/pdf)
https://doi.org/10.3886/E174021V1 (text/html)
https://www.aeaweb.org/doi/10.1257/mac.20190156.appx (application/pdf)
https://www.aeaweb.org/doi/10.1257/mac.20190156.ds (application/zip)
Access to full text is restricted to AEA members and institutional subscribers.

Related works:
Working Paper: Grounded by Gravity: A Well-Behaved Trade Model with Industry-Level Economies of Scale (2016)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:aea:aejmac:v:15:y:2023:i:2:p:372-412

Ordering information: This journal article can be ordered from
https://www.aeaweb.org/journals/subscriptions

DOI: 10.1257/mac.20190156

Access Statistics for this article

American Economic Journal: Macroeconomics is currently edited by Simon Gilchrist

More articles in American Economic Journal: Macroeconomics from American Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by Michael P. Albert ().