Marketing Cost Differentials, Economics Of Scale, And The Competitiveness of Small-Country Producers

Shabtai Donnenfeld, Seev Hirsch

Research output: Contribution to journalArticlepeer-review

Abstract

The paper examines the effect of marketing cost differentials on the ability of small countries to compete with large-country producers in goods manufactured under economies of scale. It is shown that the mere presence of scale economies does not necessarily retard the performance of small-country producers unless export marketing costs exceed domestic marketing costs. When economies of scale and positive differences between export and domestic marketing costs are simultaneously present, small countries urith potentially more efficient producers may be unable to export to large countries served by less efficient local producers. Furthermore, the latter may end up exporting to the former. The policy implications is that subsidization of exports in conjunction with restrictions on domestic prices enhances national welfare.

Original languageEnglish
Pages (from-to)549-568
Number of pages20
JournalInternational Trade Journal
Volume7
Issue number5
DOIs
StatePublished - 1993
Externally publishedYes

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