External Economies of Scale and Comparative Advantage

Wilfred Ethier () and Roy Ruffin ()
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Roy Ruffin: Department of Economics, University of Houston

PIER Working Paper Archive from Penn Institute for Economic Research, Department of Economics, University of Pennsylvania

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.

Keywords: external increasing returns to scale; advantage reversals; size reversals; scale-dominant economy; comparative-cost dominant economy (search for similar items in EconPapers)
JEL-codes: F10 F12 F13 (search for similar items in EconPapers)
Pages: 18 pages
Date: 2008-02-19
New Economics Papers: this item is included in nep-int
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