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Journal Articles Review of International Economics Year : 2010

Should small countries fear deindustrialization ?

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Abstract

Will small countries deindustrialize when opening up to trade with large countries? Donald Davis (1998) shows that for the home market effect to lead to deindustrialization of small countries, trade costs for homogeneous 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 tradable inputs small countries can become deindustrialized when trading with a sufficiently large country and if trade costs are low.

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hal-00521799 , version 1 (28-09-2010)

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Ai-Ting Goh, Tomasz Michalski. Should small countries fear deindustrialization ?. Review of International Economics, 2010, 18 (4), pp.607-617. ⟨10.1111/j.1467-9396.2010.00899.x⟩. ⟨hal-00521799⟩

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