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Market Size, Differentiated Scale Economies and Interindustry Trade

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  • Roehlano M. Briones

    (WorldFish Center)

Abstract

A stylized pattern of interindustry trade between developing and developed regions identifies the former as specialists in light manufactures and latter in heavy manufactures. Conventional explanations for this pattern rely on the factor proportions model, which is empirically suspect. This paper proposes an alternative model that relies on the interaction between scale economies and domestic market size. Unlike standard increasing returns analysis, the model provides a rich yet tractable characterization of variations in scale economies across industries. The model, in applying a limit pricing framework to the open economy, offers a new approach to analyzing imperfect competition and interregional trade.

Suggested Citation

  • Roehlano M. Briones, 2004. "Market Size, Differentiated Scale Economies and Interindustry Trade," International Trade 0412006, University Library of Munich, Germany.
    • Handle: RePEc:wpa:wuwpit:0412006
    Note: Type of Document - pdf; pages: 34. Explains a stylized pattern of industry specialization in international trade, by offering a new model of imperfect competition adapted from the Big Push model of Murphy, Shliefer, and Vishny (1989)
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    File URL: https://econwpa.ub.uni-muenchen.de/econ-wp/it/papers/0412/0412006.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    Interindustry trade; increasing returns; imperfect competition;
    All these keywords.

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

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