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Input substitutability,trade costs and the product cycle


  • Michalski, Tomasz

    () (HEC Paris)


Author's abstract. I exhibit a simple and realistic feature of technology and trade costs that influences the partition of manufacturing between the North and South depending on the degree of substitutability of internationally traded inputs in production. In the presence of higher wages in the North, when production of manufacturing goods requires tradeable, country-specific Ricardian inputs,goods with a low elasticity of substitution between inputs in production will have lower costs of manufacturing in the North and those with a high elasticity in the South.

Suggested Citation

  • Michalski, Tomasz, 2011. "Input substitutability,trade costs and the product cycle," Les Cahiers de Recherche 945, HEC Paris.
  • Handle: RePEc:ebg:heccah:0945

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    References listed on IDEAS

    1. Pol Antràs, 2005. "Incomplete Contracts and the Product Cycle," American Economic Review, American Economic Association, vol. 95(4), pages 1054-1073, September.
    2. Krugman, Paul R., 2000. "Technology, trade and factor prices," Journal of International Economics, Elsevier, vol. 50(1), pages 51-71, February.
    3. Gene M. Grossman & Esteban Rossi-Hansberg, 2008. "Trading Tasks: A Simple Theory of Offshoring," American Economic Review, American Economic Association, vol. 98(5), pages 1978-1997, December.
    4. Raymond Vernon, 1966. "International Investment and International Trade in the Product Cycle," The Quarterly Journal of Economics, Oxford University Press, vol. 80(2), pages 190-207.
    5. Mathias Thoenig & Thierry Verdier, 2003. "A Theory of Defensive Skill-Biased Innovation and Globalization," American Economic Review, American Economic Association, vol. 93(3), pages 709-728, June.
    6. Daron Acemoglu, 2003. "Patterns of Skill Premia," Review of Economic Studies, Oxford University Press, vol. 70(2), pages 199-230.
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    More about this item


    input substitutability; trade costs; north-south trade; product cycle;

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • R30 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - General


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