Scale Economies and International Trade in a Rapidly Growing Region

David, Byron L.; Kellman, Mitchell H.

doi:1997.12.1.26

Journal of Economic Integration 1997 March;12(1) :26-46.
DOI: https://doi.org/10.11130/jei.1997.12.1.26

Scale Economies and International Trade in a Rapidly Growing Region

Byron L. David, Mitchell H. Kellman

The City College of New York
The City College of New York, Graduate Center of the City University of New York

ABSTRACT

Scale is universally acknowledged as important in the determination of national comparative advantage. Paradoxically, attempts to associate empirical measures of scale economies and international trade volume have proved largely inconclusive, and often have been found to sport the "wrong" sign. We examine the trade-scale nexus in the context of East Asian NICs and "Next-Tier" NICs whose economies and exports have grown especially rapidly since the mid-1960s. In a cross section context we replicate the negative correlations typically found in the literature. By combining time section and cross section analyses we demonstrate significant positive correlations in a dynamic context, finding that the smaller the country the greater the scale economy gains for any given population increase. (JEL Classification: F12)

REFERENCE

1.	Chow, P. and Kellman, M., [1993], Trade: The Engine of Growth in East Asia, New York, Oxford University Press.

2.	Davis, D., [1991], "Intraindustry Trade: A Heckscher- Ohlin - Ricardo Approach," Columbia University Discussion Paper, Nov. 8.