Scale economies and trade

While previous research has shown that industries with high-scale economies more frequently have low rather than high intra-industry trade shares, this study provides strong support for other predictions of modern trade models. Industries with high-scale economies more frequently have high rather than low export and import shares. A finding that high-scale economies is associated with low net export shares may be due to the role scale economies play in generating both high industry export and import shares. Theoretical and empirical studies should focus attention on relationships among scale economies, trade flows and net exports.