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Economic geography and regional production structure : an empirical investigation

Author: Donald R Davis; David E Weinstein; Federal Reserve Bank of New York.
Publisher: New York : Federal Reserve Bank of New York, 1998.
Series: Staff reports (Federal Reserve Bank of New York), no. 40.
Edition/Format:   eBook : EnglishView all editions and formats
Summary:
"There are two principal theories of why countries or regions trade: comparative advantage and increasing returns to scale. Yet there is virtually no empirical work that assesses the relative importance of these two theories in accounting for production structure and trade. We use a framework that nests an increasing returns model of economic geography featuring "home market effects" with that of Heckscher-Ohlin. We  Read more...
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Material Type: Internet resource
Document Type: Internet Resource
All Authors / Contributors: Donald R Davis; David E Weinstein; Federal Reserve Bank of New York.
OCLC Number: 39486949
Notes: "May 1998"--Cover.
Description: 48 pages : illustrations ; 22 cm.
Series Title: Staff reports (Federal Reserve Bank of New York), no. 40.
Responsibility: by Donald R. Davis and David E. Weinstein.

Abstract:

"There are two principal theories of why countries or regions trade: comparative advantage and increasing returns to scale. Yet there is virtually no empirical work that assesses the relative importance of these two theories in accounting for production structure and trade. We use a framework that nests an increasing returns model of economic geography featuring "home market effects" with that of Heckscher-Ohlin. We employ these trade models to account for the structure of regional production in Japan. We find support for the existence of economic geography effects in eight of nineteen manufacturing sectors, including such important ones as transportation equipment, iron and steel, electrical machinery, and chemicals. Moreover, we find that these effects are economically very significant. The latter contrasts with the results of Davis and Weinstein (1996), which found scant economic significance of economic geography for the structure of OECD production. We conclude that while economic geography may explain little about the international structure of production, it is very important for understanding the regional structure of production"--Abstract.

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