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Intermediate
Goods Trade, Technology Choice and Productivity |
Shin-Kun
Peng Ping Wang Raymond
Riezman |
Working paper |
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Riezman Raymond |
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We
develop a dynamic model of intermediate goods trade in which the pattern and the
extent of intermediate goods trade are endogenous. We consider a small open
economy whose final good production employs an endogenous array of intermediate
goods, from low technology (high cost) to high technology (low cost). The underlying intermediate goods
technology evolves over time. We
allow for endogenous markups and consider the effect of trade policy on both
the intensive and extensive margins. The existence of trade barriers means
that there is a nondegenerate range of intermediate goods that are nontraded.
The ranges of imports, exports and nontraded intermediate goods, as well as
the entire range of intermediate products used are all endogenously determined.
The responses of these ranges, markups and productivity to domestic and
foreign trade liberalization are then analyzed. |