Trade effects of scale economies: evidence from four EU countries

Abstract

This paper investigates the empirical relationship between the magnitude of scale economies and trade. Scale economies are directly estimated from a non linear translog production function system. These estimates are then introduced in an original supply–demand export model. The application of this model to four EU countries indicates that exports unambiguously rise with the degree of scale economies. These results support Schmitt and Yu's [Econ. Lett. 74 (2001) 127] theoretical expectations.