The gains from the division of labour and comparative advantage

Kwok Tong Soo ()

No 33867696, Working Papers from Lancaster University Management School, Economics Department

Abstract: This paper develops a model of international trade based on comparative advantage and the division of labour. Comparative advantage in intermediate goods determines the extent of the division of labour, while the division of labour and comparative advantage in final goods lead to gains from trade. Labour is used to produce traded intermediate inputs which are used in the production of traded final goods; therefore trade is both inter- and intra-industry in nature. Large countries export a smaller share of final goods and a larger share of intermediate goods than small countries. These predictions find supportive evidence in the data.

Keywords: Division of labour; Comparative advantage; Gains from trade (search for similar items in EconPapers)
Date: 2013
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