Grounded by Gravity: A Well-Behaved Trade Model with Industry-Level Economies of Scale

Abstract

We propose a model to study the role of industry-level external economies of scale in open economies. If the elasticity governing the strength of external economies is below the inverse of the trade elasticity in each industry, then specialization under frictionless trade is consistent with comparative advantage, the model is tractable even with trade frictions, and all countries gain from trade. External economies lower gains from trade except if the country specializes in industries with high scale economies, and they amplify the gains from further trade liberalization except if it leads to specialization in industries with low scale economies. (JEL D24, F11, F12, F13)

New Trade Models, Same Old Emissions?

“…21 Also, as mentioned in the previous section, ι ni depends on γ i . 22 We introduce the nest compared to Section 3 to ensure a unique equilibrium in the monopolistic competition versions of the model (see Kucheryavyy et al, 2023, for a discussion).…”

“…General model set-upWe extend the model in Section 3 to multiple sectors S. The production technology and market structure in each industry are the same as in the aggregate consideration above.Additionally, we followKucheryavyy et al (2023),Farrokhi and Lashkaripour (2024), andLashkaripour and Lugovskyy (2023) and assume that consumers have a three-tier nested CES utility. The upper-tier is Cobb-Douglas across sectors with spending share κ ns .…”

Understanding urban concentration of complex manufacturing activities in China

“…To meet the challenge, we follow the wisdom in industrial economics to adapt a measure of scale elasticity into the urban context, and denote it as urban productivity. Scale elasticity is initially used in the analysis of firm-level production [39], but later on applied to the industry-level analysis of external economies of scale for manufacturing and trade at the industry and country level [40][41][42]. It deals with the relation between the intensity of labor/capital and the associated growth of output.…”

“…For returns to agglomeration, we identify the scaling relation between industrial output and industrial labor employment as urban productivity. This relation is also measured in a similar Cobb-Douglas form as above and is very similar to scale elasticity in industrial economics [39][40][41][42] but adapted into the urban context. We demonstrate that scale elasticity is a suitable measure since it stays nearly constant at each employment scale.…”

Financial health and economic growth responsiveness as solution to environmental degradation in Pakistan

“…The environment is a natural canvas of our only home; every material we produce, consume, or waste within this confined space lingers and echoes its presence for generations (d’Arge and Kogiku 1973 ). In the current era of unyielding monetary growth targets and widespread demographic shifts, safeguarding our shared home, the Earth, has increasingly become a challenge because anthropogenic activities such as the utilization of natural, energy, and financial resources for monetary growth have significantly diminished environmental quality by polluting water, soil, and air (Kucheryavyy et al 2023 ; Marfatia 2023 ). According to the United Nations Economic and Social Commission for Western Asia, any undesirable change in natural settings caused by the depletion of air, water, and soil, as well as the destruction of ecosystems and the extinction of wildlife, is called environmental degradation (Singh et al 2022 ).…”