Apple trade: factor endowments or increasing returns?

That’s real apples, not the company.  Timothy Taylor reports:

But even within the production of apples, there is global specialization. The US economy both exports and imports apples, depending on the season, but overall runs a trade surplus in apples. However, the U.S. runs a substantial trade deficit in frozen apple juice concentrate, relying heavily on imports from China. Here are some statistics about U.S. trade in apples from the U.S. Department of Agriculture (which are helpfully archived on-line at Cornell University).

You should note that both increasing returns models and Heckscher-Ohlin approaches to trade can give rise to what is commonly called “specialization,” and thus citing specialization does not answer the question posed in the title of this post and it need not necessarily favor increasing returns to scale models.

By the way, here is a new Paul Krugman paper on trade (pdf).


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