External Economies of Scale and Comparative Advantage

Wilfred J. Ethier () and J. Ruffin Roy ()
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Wilfred J. Ethier: University of Pennsylvania
J. Ruffin Roy: University of Houston

A chapter in International Trade and Economic Dynamics, 2009, pp 37-47 from Springer

Abstract: We investigate the interplay, in international trade, between comparative advantage and increasing returns to scale that are external to the firm. We focus especially on “advantage reversals,” where the country with a comparative-cost disadvantage in producing a good nevertheless is able to export it because of the economies of large-scale production. We examine trade policy in such a situation, looking especially at whether that policy should aim at basic policy-regime change. Koji Shimomura was a delightful person, a warm friend, a dependable follower of sumo, and a thoroughly responsible academic. We miss him. Here we address a subject that he would have appreciated. We return to the implications of increasing returns to scale for the gains from trade and for the role of trade policy. This topic was pioneered by Frank Graham (1923).

Keywords: Home Country; Comparative Advantage; Trade Policy; Scale Economy; Regime Change (search for similar items in EconPapers)
Date: 2009
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-3-540-78676-4_6

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DOI: 10.1007/978-3-540-78676-4_6

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