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A Trade Model of Intermediate Products With Transportation Cost

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  • Kim Chong-Sup

Abstract

This paper presents a trade model of intermediate products where a country has the same production technology as the outside world, and the source of trade is the unbalance in the factor endowment. The decision as to how much to process the raw material before exporting depends on the capital requirements for the processing, and the change in transportation cost due to the processing. The lower the requirements of capital coupled with a more rapid fall in the transportation cost in the earlier stage of production, the more probable that the country will export the processed intermediate good instead of the raw material.

Suggested Citation

  • Kim Chong-Sup, 2002. "A Trade Model of Intermediate Products With Transportation Cost," International Economic Journal, Taylor & Francis Journals, vol. 16(3), pages 97-113.
    • Handle: RePEc:taf:intecj:v:16:y:2002:i:3:p:97-113
    DOI: 10.1080/10168730200000023
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    1. Hong, Wontack, 1970. "The Heckscher-Ohlin Theory of Factor Price Equalization and the Indeterminacy in International Specialization," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 11(2), pages 328-333, June.
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    3. Avinash K. Dixit & Gene M. Grossman, 1982. "Trade and Protection with Multistage Production," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 49(4), pages 583-594.
    4. Sanyal, Kalyan K, 1983. "Vertical Specialization in a Ricardian Model with a Continuum of Stages of Production," Economica, London School of Economics and Political Science, vol. 50(197), pages 71-78, February.
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