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Oligopsonistic Intermediate Input and Patterns of Trade

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  • Stephen Devadoss
  • Wongun Song
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    Abstract

    We examine the validities of traditional trade theorems and patterns of trade for an economy with an oligopsonistic intermediate input. Specifically, the model consists of two final goods. one intermediate good, and two primary factors. One final good and the intermediate good are produced using primary factors, capital and labor. The second final good is produced using the intermediate good and labor. All markets operate under perfect competition except the intermediate good market, which is oligopsonistic. This model reflects the real world phenomena of oligopsony power excerted by some industries (e.g., the food processing industry) in the intermediate good purchases. Our analysis shows that some of the traditional trade theorems and H.O trade pattern may be overturned if the factor intensity of the competitive sector lies between those of oligopsony and intermediate good sectors. [F12]

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    Bibliographic Info

    Article provided by Taylor & Francis Journals in its journal International Economic Journal.

    Volume (Year): 17 (2003)
    Issue (Month): 3 ()
    Pages: 77-97

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    Handle: RePEc:taf:intecj:v:17:y:2003:i:3:p:77-97

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    1. Neary, J Peter, 1978. "Dynamic Stability and the Theory of Factor-Market Distortions," American Economic Review, American Economic Association, vol. 68(4), pages 671-82, September.
    2. McCulloch, Rachel & Yellen, Janet L., 1980. "Factor market monopsony and the allocation of resources," Journal of International Economics, Elsevier, vol. 10(2), pages 237-247, May.
    3. Jones, Ronald W, 1971. "Distortions in Factor Markets and the General Equilibrium Model of Production," Journal of Political Economy, University of Chicago Press, vol. 79(3), pages 437-59, May-June.
    4. Calvo, Guillermo & Wellisz, Stanislaw, 1983. "International factor mobility and national advantage," Journal of International Economics, Elsevier, vol. 14(1-2), pages 103-114, February.
    5. Woodland, A D, 1977. "Joint Outputs, Intermediate Inputs and International Trade Theory," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 18(3), pages 517-33, October.
    6. Jones, Ronald W. & Peter Neary, J., 1979. "Temporal convergence and factor intensities," Economics Letters, Elsevier, vol. 3(4), pages 311-314.
    7. Ray, Alok, 1975. "Traded and Nontraded Intermediate Inputs and Some Aspects of the Pure Theory of International Trade," The Quarterly Journal of Economics, MIT Press, vol. 89(2), pages 331-40, May.
    8. Jones, Ronald W. & Easton, Stephen T., 1989. "Perspectives on buy-outs and the Ramaswami effect," Journal of International Economics, Elsevier, vol. 27(3-4), pages 363-371, November.
    9. Riedel, James, 1976. "Intermediate Products and the Theory of International Trade: A Generalization of the Pure Intermediate Good Case," American Economic Review, American Economic Association, vol. 66(3), pages 441-47, June.
    10. Batra, Raveendra N & Casas, Francisco R, 1973. "Intermediate Products and the Pure Theory of International Trade: A Neo-Heckscher-Ohlin Framework," American Economic Review, American Economic Association, vol. 63(3), pages 297-311, June.
    11. Jones, Ronald W. & Coelho, Isaias & Easton, Stephen T., 1986. "The theory of international factor flows: The basic model," Journal of International Economics, Elsevier, vol. 20(3-4), pages 313-327, May.
    12. Jones, R.W. & Neary, P., 1988. "Wage Sensitivity Ranking And Temporal Convergence," RCER Working Papers 143, University of Rochester - Center for Economic Research (RCER).
    13. James R. Markusen & Arthur J. Robson, 1980. "Simple General Equilibrium and Trade with a Monopsonized Sector," Canadian Journal of Economics, Canadian Economics Association, vol. 13(4), pages 668-82, November.
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