Increasing returns and the variety of traded goods: Evidence for the OECD, 1961-2000
Bas Straathof, MERIT, Maastricht University
If scale economies are the primary reason for international trade, then
the number of exported product types must depend on the size of the country.
The evidence presented in this paper shows that a country's ratio of
import variety to export variety is largely determined by the size of its
workforce relative to that of the OECD. The found relation implies that
increasing returns are likely to be an important reason for trade.