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Country size and trade in intermediate and final goods

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  • Kwok Tong Soo

Abstract

This paper documents a negative relationship between country size and the share of final consumption goods in total exports. A model is developed, based on the division of labour and comparative advantage, to explain this relationship. Labour is used to produce traded intermediate inputs which are used in the production of traded final goods. Large countries gain relatively more from comparative advantage than from the division of labour, while the opposite is true for small countries. As in the data, large countries export a smaller share of final goods and a larger share of intermediate goods than small countries. It is shown that the model developed in the paper yields the same results as a model based on monopolistic competition.

Suggested Citation

  • Kwok Tong Soo, 2018. "Country size and trade in intermediate and final goods," The World Economy, Wiley Blackwell, vol. 41(2), pages 634-652, February.
  • Handle: RePEc:bla:worlde:v:41:y:2018:i:2:p:634-652
    DOI: 10.1111/twec.12538
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    Cited by:

    1. Berna Sezen Özen & Tüzin Baycan, 2022. "Regional Innovation Performances in Turkey," Sustainability, MDPI, vol. 14(16), pages 1-34, August.

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