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Should small countries fear deindustrialization ?

Tomasz Michalski () and Ai Ting Goh

No 916, HEC Research Papers Series from HEC Paris

Abstract: Will small countries deindustrialize when opening up to trade with large countries? Davis(1998) shows that for the home market e¤ect to lead to deindustrialization of small countries, trade costs for homogenous goods must be su¢ ciently smaller than trade costs in di¤erentiated goods, a condition which is not supported by empirical evidence. We show that if di¤erentiated goods production uses tradeable inputs small countries can become deindustrialized when trading with a su¢ ciently large country and if trade costs are low.

Keywords: home market e¤ect; deindustrialization; trade costs; economic geography; intermediate goods (search for similar items in EconPapers)
JEL-codes: F01 R12 (search for similar items in EconPapers)
Pages: 24 pages
Date: 2009-03-19
New Economics Papers: this item is included in nep-int
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Related works:
Journal Article: Should Small Countries Fear Deindustrialization? (2010) Downloads
Working Paper: Should small countries fear deindustrialization ? (2010)
Working Paper: Should small countries fear deindustrialization? (2009)
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