Do Geographic Scale Economies Explain Disturbances to Heckscher-Ohlin Trade?
Pamela J. D. Smith
University of Minnesota - College of Agricultural, Food and Environmental Sciences - Department of Applied Economics
Review of International Economics
This paper examines whether "geographic scale economies" explain the trade that remains unexplained by the Heckscher-Ohlin model. The paper develops a theoretical specification that integrates geographic scale economies into the Heckscher-Ohlin model, and develops a statistical method for detecting geographic scale economies in the distributional features of a disturbance term. The units of analysis are US states. The findings reveal that empirical support for the Heckscher-Ohlin theory is improved by accounting for geographic scale economies within states; geographic scale economies do not generate differences in Rybczynski effects across states; and the scope of geographic scale economies is contained within states.
JEL Classification: F10, R12Accepted Paper Series
Date posted: September 29, 1998
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