Intraindustry trade in intermediate goods

Teit Lüthje

International Advances in Economic Research, 2001, vol. 7, issue 4, 393-408

Abstract: Since intermediate goods play such a vital role in foreign trade, this paper develops a model that explains the benefits from intraindustry trade in differentiated intermediate goods. In comparison with a situation of autarchy, this type of trade causes an increase in the number of intermediate good varieties. In this way, the producers of final goods will benefit from intermediate good varieties, which are closer to the ideal for a specific production process. At the same time, the producers of intermediate goods will, under conditions of international division of labor, benefit from economies of scale. Copyright International Atlantic Economic Society 2001

Date: 2001
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DOI: 10.1007/BF02295769

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