In search of scale effects in trade and growth

David K. Backus, Patrick J. Kehoe, Timothy J. Kehoe

Research output: Contribution to journalArticlepeer-review

144 Scopus citations


We look for the scale effects predicted by some theories of trade and growth based on the dynamic returns to scale that arise from learning by doing, investment in human capital, or development of new products. We find little empirical evidence of a relation between the growth rate of GDP per capita and the measures of scale implied by the theory. Restricting attention to the manufacturing sector, however, we find a significant relation between the growth rate of output per worker and the relevant scale variables. We also find that growth rates are significantly related to measures of intra-industry trade.

Original languageEnglish (US)
Pages (from-to)377-409
Number of pages33
JournalJournal of Economic Theory
Issue number2
StatePublished - Dec 1992
Externally publishedYes

Bibliographical note

Funding Information:
’ We thank Robert Barre, Lawrence Christiano, Larry Jones, Michael Devereux, Edward Prescott, Paul Romer, Jose Scheinkman, and two anonymous referees for useful comments; Harry Bowen, Paul Emerson, Robert Evenson, George McCarthy, and David Viry for help with data; the National Science Foundation and the Center for Japan-U.S. Business and Economic Studies fellowship program for financial support; and Hossain Amirizadeh and Karine Moe for excellent research assistance. The views expressed herein are those of the authors and not necessarily those of the Federal Reserve Bank of Minneapolis or the Federal Reserve System.


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