ENDOGENOUS VS EXOGENOUS COMPARATIVE ADVANTAGE AND ECONOMIES OF SPECIALIZATION VS ECONOMIES OF SCALE

This paper draws the distinctions between the concepts of endogenous and exogenous comparative advantages and between the concepts of economies of specialization and scale. A comparison between the equilibrium model endogenizing the degree of specialization and endogeneous comparative advantages, neoclassical trade model with exogeneous comparative advantages, and an extended Dixit-Stiglitz model with a tradeoff between economies of scale and transaction costs is used to explore the equilibrium implications of the distinctions.