Helpman and Krugman introduced economies of scale to analyze comparative advantages (Helpman and Krugman, 1985). They developed a monopoly competition model, which is based on free entry and average cost pricing, and regards the quantity of product diversity as endogenously determined by the interaction between scale income and market size. In the case of self-sufficiency, a country's product diversity is very small, and trade enriches consumers' choices. At the same time, if trade increases the demand elasticity of consumers, the scale efficiency of a single manufacturer can also be improved. In this way, a single manufacturer has established an advantage in the international market through economies of scale. In fact, Krugman proposed earlier (Krugman, 1980) that the size of the domestic market will affect a country's comparative advantage in the world. He discussed that in several cases, manufacturers with large markets in this country can make more effective use of economies of scale and thus become more competitive internationally. Many empirical studies also show that exporters are usually larger than domestic manufacturers, and there is a positive correlation between the size of manufacturers and industries and the export volume. Following the ideas of Helpmann and Krugman, James R.Tybout (1993) further summarized and focused on increasing returns within scale as the source of comparative advantage. He believes that the internal increasing returns to scale model is superior to the traditional comparative advantage theory in three aspects: First, the model establishes a new basis for obtaining benefits from specialization, even if trading partners have the same proportion of technology and elements, this foundation still exists. Secondly, the model holds that manufacturers with large domestic market have competitive advantages in the world market. Thirdly, the model helps to understand the possible relationship among trade, productivity and growth.
Economies of scale are not enough to explain comparative advantage.
However, some scholars believe that economies of scale are not enough to explain comparative advantage. Dole (1993) reminds us that the explanation of comparative advantage by economies of scale is mainly aimed at the increasing intra-industry trade between developed countries with similar factor endowments in recent years. The trade patterns of these countries reflect a high degree of specialization. However, they believe that economies of scale in the production process can partially explain this specialization, but not all. In most industries, different companies contribute to a country's export performance, and each company has many factories, so the economies of scale of companies or factories cannot explain all national specialization. He believes that technological differences are a reasonable explanation for the deepening of specialization in developed countries (USD, 1993). Many export products from Japan, Germany and the United States are regarded as high-tech products, because R&D accounts for a high proportion in the production of these products, and scientists and engineers account for a large proportion of employees. However, Doyle also believes that although technological differences can explain comparative advantage well, this explanation is only effective in the short term and the explanation of long-term comparative advantage is not satisfactory.
Because any proprietary technology will eventually become an international public product. So, what can be the source of long-term comparative advantage of high-tech industries? Dole believes that it is a system that produces new technologies and cultivates supplementary skilled labor on the existing basis.
Research Ideas of Helpmann and Krugman
Some scholars question this from another angle (Hummels and Levin Thorne, 1993). The query begins with Helpman's paper "Incomplete Competition and International Trade". In this paper, Helpmann develops a simple intra-industry trade model to illustrate the relationship between country size and intra-industry trade. The most important theoretical insight of this paper is that when each product is produced in only one country, the size of the country is the only determinant of the composition of world GDP. Moreover, based on the OECD data, Helpmann concluded that the trade volume between trade groups is also increasing as the size of countries is getting closer. The model in this paper assumes that each product is produced only in one country; All trade is intra-industry trade; All countries have the same preference. In this regard, Hammers and levinson think that this assumption is too harsh, and this model is not applicable to every pair of trading countries every year. They believe that distance will increase the friction cost of differentiated product trade. Countries close to each other engage in intra-industry trade because they like diversification. Consumers in distant countries are willing to consume diversified products from abroad, but high transportation costs will limit this trade. In addition, border trade, seasonal trade, trade restrictions and language and culture will all affect intra-industry trade. Moreover, they further compared the data of OECD and non-OECD countries (14 countries), and concluded that intra-industry trade accounted for 25.3% of the total trade volume in OECD countries, while it was only 0.5% in non-OECD countries. In their view, this empirical result also shows that the influence of product differences and economies of scale on intra-industry trade and comparative advantage is not sufficient, and there may be other more important factors.
Grossman and Hupman started with research and development (R&; D) Popularize the theory of comparative advantage (Grossman and Helpman, 1989, 1990). The importance of their work lies in extending the static analysis of comparative advantage to the dynamic analysis. They developed a multinational dynamic general equilibrium model of product innovation and international trade through R&: D's Comparative Advantage and Intertemporal Evolution of World Trade to study the relationship between product innovation and international trade. In their model, companies will incur resource costs when introducing new products. Forward-looking producer guidance R&; Enter the market with profit opportunities. New products will not completely replace old products. When there are more commodities, prices, interest rates and trade patterns will evolve over time. There are intra-industry trade and inter-industry trade, the former is bound by R&; D expenditure depends on resource endowment. International capital flows are used for research and development; D financing, in some cases, multinational companies will appear. Although Grossman and Herpmann's dynamic analysis is based on many original static analysis, such as Krugman (Kmgman, 1979) and Dixit and Norman (1980), it is quite different from the previous literature. They not only promote the dynamic analysis of comparative advantage, but also differ from the early dynamic research on trade and product innovation in dynamic analysis. These studies (Kru~nan,1979b; ; Dollar, 1986, etc. ) provides a useful insight into the steady-state nature of trade equilibrium (when products were first developed by the North and later imitated by the South), but the analysis is incomplete because all the interactions between general equilibrium and economic factors driving product innovation rate are not considered. Grossman and Hupman's framework clearly deals with private investment R&; D. incentives and research and development; D resource requirements for activities. Resources are allocated to R&; Division D will lead to the production of differentiated products and homogeneous products, and then form the HeXie-Olin trade model along the dynamic path of trade equilibrium. This trade pattern will lead to the development of comparative advantage. Yang and Borland (199 1) criticized the mainstream neoclassical theory and expanded the analysis of endogenous comparative advantage from the perspective of specialization and division of labor. They believe that endogenous comparative advantage will increase with the improvement of division of labor. Because the division of labor improves everyone's professional level and accelerates the accumulation of personal human capital. In this way, even if individuals do not have innate or exogenous comparative advantages, they can gain endogenous comparative advantages by participating in the division of labor and improving their professional level. Their analysis of endogenous comparative advantage is placed in the theoretical framework of the interaction between transaction costs and division of labor evolution. According to this framework, economic growth is not only a problem of resource allocation, but also a problem of economic organization evolution, and market development and technological progress are only the consequences of organizational evolution. This framework analyzes the dynamic equilibrium process of economic evolution from self-sufficiency to advanced division of labor, and explains the thought of Smith and An Yang: economic growth originates from division of labor evolution. In the early stage of economic development, the discounted value of income stream caused by specialization is lower than the current utility loss caused by the increase of transaction cost caused by specialization, and the level of specialization will be very low; With the passage of time, the effect of production practice makes perfect will gradually increase the benefits brought by specialization, so there will be a higher level of specialization and the endogenous comparative advantage will be continuously enhanced. It should be emphasized that their framework is different from the standard neoclassical framework. The latter's analysis of comparative advantage is mainly based on economies of scale, and their framework puts specialization and division of labor at the core of the analysis, and strictly distinguishes economies of scale from specialized economies, thus carrying forward Smith's core thoughts on division of labor and endogenous comparative advantage.
In addition, Grossman and McGee (Grossman and Maggi, 2000) also analyzed the international comparative advantage from the perspective of human capital allocation. They developed an international trade competition model with similar factor endowments, and analyzed the influence of human capital distribution on comparative advantage and trade. They found that in countries with relatively homogeneous human capital, the production technology used in exporting products is characterized by the complementarity between human capital. In this case, when all tasks are completed quite well, the effective output is greater than that when some tasks are completed very well and others are completed very poorly. Efficient production organizations need human capital matching of similar talents, which is easier to achieve in countries with homogeneous human capital. On the other hand, for countries with heterogeneous human capital, the production technology used in their export products has the characteristics of substitution between human capital. In this case, some tasks are completed by companies with relatively prominent figures, and the other part is completed by companies with relatively low talents. Then, for countries with heterogeneous human capital characteristics, if there are a larger proportion of outstanding talents, then they will have a comparative advantage in industries sensitive to outstanding talents.
Clarida and Findlay (1992) analyzed the government's contribution to comparative advantage and trade. Their views are different from traditional economic theory and new institutional economics represented by North. They believe that the government's intervention in conventional social sectors such as education and scientific research, transportation and communication will significantly improve the productivity of private companies, and some economic sectors will undoubtedly benefit from it. This is because the well-known problem of "hitchhiking" and the non-competitiveness and non-exclusiveness of public goods make private companies have no incentive to provide public goods and services, which must be supplied by the government.
Other scholars have discussed the theory of comparative advantage from the perspective of evolution. Fisher and Kakkar (2002) believe that comparative advantage is the result of the long-term evolution of open economy. On the basis of Ricardo's theory and Aqin's framework, they systematized their theoretical understanding of international trade, and proposed that natural selection would eliminate invalid enterprises and promote a stable and even efficient world trade model. They did not assume the existence of auctioneers in Walras, but discussed the matching process of coordinating trade and enterprises. The main conclusion of their analysis is that specialization with comparative advantages (which may not be fully specialized in larger countries) is the only steady state of world economic evolution.