Trade in Intermediate Goods in a Model with Monopolistic Competition

Bibliographic Data

ID9721970
AuthorsBrati Sankar Chakraborty (Indian Statistical Institute, corresponding author)
Year2003
Volume70
Issue279
Pages551-566
Publication date2003-08-01
Open AccessYes
TypeARTICLE
VenueEconomica (JOURNAL)
Journal identifiersISSN: 0013-0427 • E-ISSN: 1468-0335
PublisherWiley (PUBLISHER • GB)
DOI10.1111/1468-0335.t01-1-00070
OpenAlexW2137069306
LanguageEN
Citations received1
References cited12

A model of trade in intermediate and final goods is developed incorporating the features of increasing returns and monopolistic competition. It is shown that the endowment basis (comparative advantage) for trade becomes crucial in determining trade across stages of production, with the capital‐rich country a net exporter of specialized intermediate inputs and an importer of the final good. The capital‐rich country is shown to be immune to distributional conflicts, whereas for the labour‐rich country the distributional conflict crucially hinges upon the elasticity of substitution between intermediate inputs. Thus, free trade has inherently asymmetric effects on the functional distribution of income for countries differing in labour–capital ratios

Capital (architecture) · Capital good · Comparative advantage · Economics · Elasticity of substitution · Endowment · Final good · Free trade · Intermediate good · International economics · International trade · Microeconomics · Monopolistic competition · Monopoly · Production (economics) · Public good · Economic Growth and Productivity · Economic theories and models · Economic Theory and Policy

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