multi-country approach to factor-proportions trade and trade costs
By: James R. Markusen, Anthony J. Venables.
Contributors: Venables, Anthony.; National Bureau of Economic Research.
Series: NBER working paper series -- no. 11051.; Working paper series (National Bureau of Economic Research) -- working paper no. 11051.
Publisher: National Bureau of Economic Research
Published: 2005
Place of publication: Cambridge, Mass
Language: eng
Number of pages: 34
Subjects: International trade -- Econometric models
Description: "Classic trade questions are reconsidered by generalizing a factor-proportions model to multiple countries, multi-stage production, and country-specific trade costs. We derive patterns of production specialization and trade for a matrix of countries that differ in relative endowments (columns) and trade costs (rows). We demonstrate how the ability to fragment production and/or a proportional change in all countries' trade costs alters these patterns. Production specialization and the volume of trade are higher with fragmentation for most countries but interestingly, for a large block of countries, these variables fall following fragmentation. Countries with moderate trade costs engage in market-oriented assembly, while those with lower trade costs engage in export-platform production. These two cases correspond to the concepts of horizontal and vertical affiliate production in the literature on multinational enterprises. Increases in specialization and the volume of trade accelerate as trade costs go to zero with and without fragmentation"--National Bureau of Economic Research web site.
Notes: "January 2005."

Includes bibliographical references (p. 26-27).

Also available in PDF from the NBER world wide web site (www.nber.org).