eng Science and Education Publishing Journal of Finance and Economics 2328-7276 2018-01-29 6 1 26 31 10.12691/jfe-6-1-4 JFE2018614 article Lo Chu-Ping cplo@ntu.edu.tw 1 Department of Agricultural Economics, National Taiwan University, Taipei, Taiwan We have presented a simple model to show that trade elasticity is determined by not only consumers' preferences, but also producers' comparative advantages in a world where trade is driven by both consumers' love-of-variety and producers' comparative advantages. In this model, scale matters in trade elasticity, with smaller countries tending to exhibit a larger one. In addition to tradable intermediate goods, this model also shows that scale is a key factor influencing gains from trade. As a result, smaller countries that are engaged in more international outsourcing activities typically benefit with relatively greater gains from trade after trade liberalization. http://pubs.sciepub.com/jfe/6/1/4/jfe-6-1-4.pdf gains from trade trade elasticity international outsourcing welfare