Trade need not be the result of comparative advantage. Instead, it can result from increasing returns or

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Trade need not be the result of comparative advantage. Instead, it can result from increasing returns or economies of scale, that is, from a tendency of unit costs to be lower with larger output. Economies of scale give countries an incentive to specialize and trade even in the absence of differences in resources or technology between countries. Economies of scale can be internal (depending on the size of the firm) or external (depending on the size of the industry). LO.1

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International Trade Theory And Policy

ISBN: 978-1292417233

12th Global Edition

Authors: Paul Krugman ,Maurice Obstfeld ,Marc Melitz

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