Abstract
This article develops a dual general equilibrium model to analyze the effects of intra-industry trade in both intermediate goods and final goods on the productivity in the final good production. Intra-industry trade in intermediate goods determines an increase in the number of intermediate good varieties available in the final good production, and intra-industry trade in final goods determines a reduction in the number of adaptations of an intermediate good to the final good production. Thereby, the productivity in the final good production increases. Different shares of intra-industry trade in intermediate goods and final goods in a general equilibrium setting implies that Jones' “magnification effect” and both the Rybczynski theorem and the Stolper-Samuelson theorem are not valid.
Similar content being viewed by others
References
Amano, Akihiro (1963) “Neo-Classical Models of International Trade and Economic Growth.” Rochester, NY: University of Rochester.
Dixit, Avinash and Joseph Stiglitz (1977) “Monopolistic Competition and Optimum Product Variety.” American Economic Review 67:297–308.
Ethier, J. Wilfred (1979) “Internationally Decreasing Costs andWorld Trade.” Journal of International Economics 9:1–24.
—— (1982) “National and International Returns to Scale in the Modern Theory of International Trade.” The American Economic Review 72(3):389–405.
Greenaway, David and Chris R. Milner (1987) “Intra-Industry Trade: Current Perspectives and Unresolved Issues.” Weltwirtschaftliches Archiv 123(1):39–57.
Greenaway, D. and J. Torstensson (1997) “Back to the Future: Taking Stock on Intra-Industry Trade.” Weltwirtschaftliches Archiv 133(2):249–269.
Helpman, Elhanan (1981) “International Trade in the Presence of Product Differentiation, Economies of Scale and Monopolistic Competition.” Journal of International Economics 11:305–340.
Helpman, Elhanan and Krugman, Paul (1985) “Market Structure and Foreign Trade: Increasing Returns, Imperfect Competition, and the International Economy.” Cambridge, Massachusetts, The MIT Press.
Jones, W. Ronald (1968) “Variable Returns to Scale in General Equilibrium Theory.” International Economic Review 10:261–272.
Krugman, Paul (1979) “Increasing Returns, Monopolistic Competition, and International Trade.” Journal of International Economics 9(4):469–479.
Lancaster, Kelvin (1979) “Variety, Equity and Efficiency.” New York, Columbia University Press.
Lüthje, Teit (2001a) “Intra-Industry Trade in Intermediate Goods.” International Advances in Economic Research 7(4):393–408.
—— (2001b) “The Conditions for the Formation of a Vertical Integrated Multinational Enterprise.” Journal of Global Business 12(23):47–57.
Takayama, Akira (1963) “On a Two-Sector Model of Economic Growth: A Comparative Statics Analysis.” Review of Economic Studies 30(2):95–104.
Williamson, E. Oliver (1981) “The Modern Corporation: Origins, Evolution, Attributes.” Journal of Economic Literature 19:1537–68.
Wong, Kar-yiu (1995) “International Trade in Goods and Factor Mobility.” Cambridge, Massachusetts, The MIT Press.
Author information
Authors and Affiliations
Rights and permissions
About this article
Cite this article
Lüthje, T. Intra-Industry Trade in Intermediate Goods and Final Goods in a General Equilibrium Setting. Open Economies Review 14, 191–209 (2003). https://doi.org/10.1023/A:1022366030762
Issue Date:
DOI: https://doi.org/10.1023/A:1022366030762