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Scale Economies, Input-Output Loops, and Trade

Dominick Bartelme, Yuyang Jiang, Konstantin Kucheryavyy and Andres Rodriguez-Clare

No 34258, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper studies the equilibrium and welfare implications of quantitative trade models with sector-level external economies of scale (EES). While empirical evidence highlights the importance of EES, prior work has examined their effects only in models without input-output linkages. Focusing on a small open economy, we derive an intuitive condition for equilibrium uniqueness that links trade elasticities, scale elasticities, and input-output coefficients. We further show that this same condition guarantees positive gains from trade, regardless of a country’s pattern of specialization.

JEL-codes: D51 F10 F11 F12 F60 (search for similar items in EconPapers)
Date: 2025-09
Note: ITI
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