Articles

Should small countries fear deindustrialization ?

A.-T. GOH, T. K. MICHALSKI

Review of International Economics

septembre 2010, vol. 18, n°4, pp.607-617

Départements : Economie et Sciences de la décision, GREGHEC (CNRS)


Will small countries deindustrialize when opening up to trade with large countries? Davis (1998) shows that for the home market effect to lead to deindustrialization of small countries, trade costs for homogenous goods must be sufficiently smaller than trade costs in differentiated goods, a condition which is not supported by empirical evidence. We show that if differentiated goods production uses tradeable inputs small countries can become deindustrialized when trading with a sufficiently large country and if trade costs are low.


JavaScriptSettings