You are here

ECONOMIES OF SCALE THEORY

5 November, 2015 - 11:54

The Economies of Scale Theory suggests that large countries will specialize in the production and exportation of products that can be mass-produced in large plants, and small countries will specialize in the production and exportation of products that require small plants and small runs. If, in addition to the size of a country, one considers the degree of sophistication of the economy, this theory makes a lot of sense. Indeed, Hufbauer correlated GNP per capita with economies of scale of exports and found an extremely strong fit. 1