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International trade and the division of labour

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  • Kwok Tong Soo

Abstract

This paper develops a model of international trade based on the division of labour under perfect competition. International trade, by eliminating the duplication of coordination costs, leads to a greater variety of intermediate goods, each produced at a larger scale than in autarky. The greater variety of intermediate inputs implies greater division of labour and hence gains from trade. Similarly to models of international trade under imperfect competition, the volume of trade depends on the relative sizes of the trading partners. Extending the model to two factors of production yields the additional result that if the two countries are sufficiently similar in their relative endowments, then both factors of production can experience gains from trade.

Suggested Citation

  • Kwok Tong Soo, 2015. "International trade and the division of labour," Working Papers 100181706, Lancaster University Management School, Economics Department.
    • Handle: RePEc:lan:wpaper:100181706
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    References listed on IDEAS

    as
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    Cited by:

    1. Kwok Tong Soo, 2016. "Country size and trade in intermediate goods," Working Papers 127876352, Lancaster University Management School, Economics Department.

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    More about this item

    Keywords

    Division of labour; intermediate goods trade; trade liberalisation;
    All these keywords.

    JEL classification:

    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade
    • F15 - International Economics - - Trade - - - Economic Integration

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