Do Geographic Scale Economies Explain Disturbances to Heckscher-Ohlin Trade?

Pamela Smith

Review of International Economics, 1999, vol. 7, issue 1, 20-36

Abstract: This paper examines whether geographic scale economies explain the trade that remains unexplained by the Heckscher-Ohlin model. The paper develops a theoretical specification that integrates geographic scale economies into the Heckscher-Ohlin model, and develops a statistical method for detecting geographic scale economies in the distributional features of a disturbance term. The units of analysis are US states. The findings reveal that empirical support for the Heckscher-Ohlin theory is improved by accounting for geographic scale economies within states; geographic scale economies do not generate differences in Rybczynski effects across states; and the scope of geographic scale economies is contained within states. Copyright 1999 by Blackwell Publishing Ltd.

Date: 1999
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