TY - UNPB

T1 - International trade and the division of labour

AU - Soo, Kwok Tong

PY - 2015

Y1 - 2015

N2 - This paper develops a model of international trade based on the division of labour under perfect competition. International trade, by eliminating the duplication of coordination costs, leads to a greater variety of intermediate goods, each produced at a larger scale than in autarky. The greater variety of intermediate inputs implies greater division of labour and hence gains from trade. Similarly to models of international trade under imperfect competition, the volume of trade depends on the relative sizes of the trading partners. Extending the model to two factors of production yields the additional result that if the two countries are sufficiently similar in their relative endowments, then both factors of production can experience gains from trade.

AB - This paper develops a model of international trade based on the division of labour under perfect competition. International trade, by eliminating the duplication of coordination costs, leads to a greater variety of intermediate goods, each produced at a larger scale than in autarky. The greater variety of intermediate inputs implies greater division of labour and hence gains from trade. Similarly to models of international trade under imperfect competition, the volume of trade depends on the relative sizes of the trading partners. Extending the model to two factors of production yields the additional result that if the two countries are sufficiently similar in their relative endowments, then both factors of production can experience gains from trade.

KW - Division of labour

KW - intermediate goods trade

KW - trade liberalisation

M3 - Working paper

T3 - Economics working paper series

BT - International trade and the division of labour

PB - Lancaster University, Department of Economics

CY - Lancaster

ER -