Economies Of Scale, Trade Costs And Export Growth Path

Krugman (1995) have showed that there is still a debate on the explanation of the fundamental question of the reason to the increase of world trade and pointed out that unprofessional scholars attributed the reason of the increase in world trade to the decrease in transportation cost that caused by technology, while economists argued that it is bilateral or multilateral trade liberalization led by policy that spur the increase in world trade. Helpman (1987), Hummels and Levinsohn (1995) developed the third explanation to this problem as a result of increasing the same in economic development level among countries. Based on the above three explanation, Feenstra(1998) developed the fourth explanation to this problem that the increase in international trade was due to the global allocation of production process and vertical specialization resulted from multinational companies.Overall, the increase in the international trade is an expansion process along the particular path under the driving force in the context of deepening economic globalization. There are mainly three components in trade increase consisted of the trade growth path, the driving force of trade growth and the effect of trade growth, at the same time the whole trade increase was accompanied by the three components as a whole. It is a systematic work to show the whole picture of trade increase. In this paper I first try to do some foundational research in which I analyze the export expansion path through export margin analysis and analyze the effect of the two paths to the trade increase by dividing the export margin as extensive margin and intensive margin. Second, in this paper I try to analyze the effect to the export margin of trade cost and economic scale and find the different effect to the trade growth among the driving forces combined with the driving forces and channels of trade growth.According to the study of export path in this paper, I found that statically, there is substantial difference in export path choice among different nations. Development countries are trying to export a variety of product in an attempting to reduce export volatility and increase the export amount, that is, extensive margin is very important in export expansion to the development countries. Second, I found that dynamically, as the increasingly grow of economic development level, the leading position of different export margin would transform in turn, from extensive margin playing the major role at the beginning to intensive margin and again returning to the specialization in the end. So, through different export channel, different countries achieved the growth in trade, but the export path they choose is not unchanged and evolved to be in accordance to the economic development level.The driving forces that promote the trade growth is consisted of many factors, such as labor productivity, tariff level and transportation conditions. It is very difficult to analyze the effect to the trade growth of all the factors. In addition, too many factors make it very difficult to distinguish the main factors. Based on gravity model and consider the trade cost and economic scale as the "intermediate target", other factors being considered as affecting the final goal through the above two "intermediate target", in this paper I analyze their effect to the export growth and export path. According to the studies in this paper, as a system, trade cost itself is very complex, there is difference in the effect of different components of trade cost to export margin. In this paper I decompose the trade costs as entry cost and transaction cost, the result is that entry cost just affect extensive margin, while transaction cost affect the both. Economic scale being as the second intermediate target in the study of the dynamic system of trade growth, from the perspective of gravity model, there is an equivalent effect of the two countries’economic scale to bilateral trade volume, but when I analyze the effect to the export margin of export margin, there is not an equivalent effect. Changes in domestic economic scale just affect the extensive margin of domestic exporters, while changes in foreign economic scale affect both the extensive margin and intensive margin of domestic exporters.As a part of normative analysis in this paper, I have analyzed theoretically the intrinsic logical relations among the export margin, trade cost and economic scale. In addition, I also analyzed the dynamics of different export margin. Then in this paper I did some empirical work using the export data from steel industry of china in an attempting to explain the ways of export growth and test the trade cost, economic scale and export margin. The result showed that during1995-2009the export of steel industry mainly come from intensive margin. The export contribution of regional level is greater than product varieties, but when value level is considered, it is the opposite. In addition, using a single level cannot explain the export growth in steel industry completely, so it is necessary to combine the export margin of regional level and product level. After calculated the different export margin using data of HS204product categories from Chinese steel industry in2007and measured extensive margin, intensive margin, price factor and quantity factor between china and the other168countries, I concluded that intensive margin playing a larger role than extensive margin and the difference of export among countries come from quantity factor rather than price factor. Considering from the perspective of the effect of trade growth driving force to the different export margin, there is a substantial effect that come from economic scale, economic development level and trade cost, but the degree of the effect is different, the effect of economic scale is greater than trade cost, while the volatility of economic growth is greater than trade cost. Therefore, the volatility of trade comes mainly from the prospect of economic development.