 Does Economic Geography Matter for International Specialization?Donald Davis () and David Weinstein Working Papers from Research Seminar in International Economics, University of Michigan Abstract: There are two principal theories of why countries trade: comparative advantage and increasing returns to scale. Yet there is no empirical work that assesses the relative importance of these two theories in accounting for production structure and trade. We use a framework that nests an increasing returns model of economic geography featuring "home market" effects with that of Heckscher-Ohlin. We employ these trade models to account for the structure of OECD manufacturing production. The data militate against the economic geography framework. Relatively few sectors match its theoretical predictions. Moreover, of the explainable variation in production patterns, endowments account for 90 per cent, economic geography but 5 per cent. Keywords: INTERNATIONAL TRADE; PRODUCTION (search for similar items in EconPapers) There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it. Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:mie:wpaper:403 Access Statistics for this paper More papers in Working Papers from Research Seminar in International Economics, University of Michigan Contact information at EDIRC. |
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