Structure Of Production, Intraindustry Trade And Their Relevance For The Optimum Currency Areas Theory

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Structure Of Production, Intraindustry Trade And Their Relevance For The Optimum Currency Areas Theory

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Miroslav Kollár

Abstract

This paper deals with the recent empirical phenomenon of intraindustry trade, i.e. trade in similar goods between similar countries. It treats this phenomenon from the point of view of the theory of structure of production, highlighting the importance of sequential nature of production and heterogeneity and specificity of factors of production, as developed by Carl Menger, Eugen von Boehm-Bawerk and their followers of the so-called Austrian school of economics. Simple theory of production structure, along the lines of Austrian economics, is presented and a useful tool for the analysis of intraindustry trade is developed. In the following discussion we make the case for vertical intraindustry specialization, complex manufactured goods and sliced-up production chains across countries. The reader immediately observes the importance of Austrian production structure theory for the analysis of intraindustry trade. We accordingly apply the concepts of the structure of production on intraindustry trade and analyze, in particular, the time- and place-aspects of international production. Finally, we show the relevance of our approach to intraindustry trade for the analysis of business cycle synchronization and Optimum currency areas theory.

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Article provided by University of Economics, Prague in its journal Politická ekonomie.

Volume (Year): 2007 (2007)
Issue (Month): 5 ()
Pages: 603-624
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Handle: RePEc:prg:jnlpol:v:2007:y:2007:i:5:id:615:p:603-624

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Find related papers by JEL classification:
B25 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Historical; Institutional; Evolutionary; Austrian
B53 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - Austrian
D24 - Microeconomics - - Production and Organizations - - - Production; Capital and Total Factor Productivity; Capacity
E22 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Capital; Investment; Capacity
E23 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Production
F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies
F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

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