Do geographic scale economies explain disturbances to Heckscher-Ohlin trade?

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Abstract

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.

Original languageEnglish (US)
Pages (from-to)20-36
Number of pages17
JournalReview of International Economics
Volume7
Issue number1
DOIs
StatePublished - Feb 1999

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