Using a model of monopolistic competition with traded and non-traded goods, this paper establishes a positive link between scale economies, the volume of intra-industry trade and the share of trade in total production. These results are consistent with empirical findings.

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Economics Letters

Schmitt, N. (Nicolas), & Yu, Z. (2001). Economies of scale and the volume of intra-industry trade. Economics Letters, 74(1), 127–132. doi:10.1016/S0165-1765(01)00519-5