The gains from the division of labour and comparative advantage
AbstractThis paper develops a model of international trade based on comparative advantage and the division of labour. Comparative advantage in intermediate goods determines the extent of the division of labour, while the division of labour and comparative advantage in final goods lead to gains from trade. Labour is used to produce traded intermediate inputs which are used in the production of traded final goods; therefore trade is both inter- and intra-industry in nature. Large countries export a smaller share of final goods and a larger share of intermediate goods than small countries. These predictions find supportive evidence in the data.
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Bibliographic InfoPaper provided by Lancaster University Management School, Economics Department in its series Working Papers with number 33867696.
Date of creation: 2013
Date of revision:
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