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The gains from external scale economies and comparative advantage

Research output: Working paper

Published
Publication date06/2013
Place of PublicationLancaster
PublisherLancaster University, Department of Economics
Number of pages12
<mark>Original language</mark>English

Publication series

NameEconomics Working Paper Series
PublisherDepartment of Economics

Abstract

This paper develops a many-good, many-country model of international trade
which combines comparative advantage and external scale economies. It is shown
that the gains from external scale economies outweigh those from comparative
advantage as the number of goods increases. Small countries gain more than large
countries from trade, because large countries are more similar to the rest of the
world than small countries. Small countries are also more specialised in
production than large countries, despite the presence of external scale economies.