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IT, Production Specialization, and Division of Labor: A Smith-Ricardo Model of International Trade

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Abstract

A simple Smith-Ricardo model is developed that incorporates division of labor into the continuum-good Ricardian model of Dornbusch et al.(1977). The trade off between the efficiency gain and coordination cost associated with production specialization de-termines the efficient level of division of labor. The model is applied to explain how the recent IT revolution could affect a country’s efficient level of production specialization and competitive advantage. In particular, absolute advantage (in division of labor) and relative labor supply plays a crucial role in determining the effects of an IT progress on a country’s competitive margin in international trade.

Suggested Citation

  • Zhihao Yu, 2003. "IT, Production Specialization, and Division of Labor: A Smith-Ricardo Model of International Trade," Carleton Economic Papers 03-06, Carleton University, Department of Economics.
    • Handle: RePEc:car:carecp:03-06
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    References listed on IDEAS

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    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade

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