The gains from trade in intermediate goods

Kwok Tong Soo ()

No 63719205, Working Papers from Lancaster University Management School, Economics Department

Abstract: This paper develops a model of intermediate and final goods trade based on comparative advantage. Firms endogenously decide whether to produce a final good directly using labour, or indirectly using both labour and intermediate inputs. It is shown that the gains from trade in intermediate and final goods exceeds that from trade in final goods alone. Allowing for decreasing trade and coordination costs results in an endogenous change in the structure of production towards a more fragmented structure, with corresponding implications for trade patterns.

Keywords: Intermediates trade; Comparative advantage; Structure of production (search for similar items in EconPapers)
Date: 2014
New Economics Papers: this item is included in nep-ger and nep-int
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