Pure Intermediate Products
In the previous chapter our analysis focused entirely on the implications of inter-industry flows for various theorems in trade theory. As noted there, most of the trade literature on intermediate products concerns the commodities which serve the dual role of goods used for final consumption and as productive inputs. However, there exists another class of intermediate goods which are produced solely to be used as productive inputs and not for final consumption at all. Such goods may be called pure intermediate goods, and include produced inputs like raw materials, spare parts, steel, etc. The current literature in trade theory pays scant attention to the implications of such products. If the ramifications of pure intermediate products ran closely parallel to those of inter-industry flows, the current neglect of the former could be easily vindicated. However, as will be demonstrated in this chapter, there are important differences between the implications of the two types of material inputs, crucial among them being the fact that, unlike with the inter-industry flows, the gross and net factor-intensity rankings need not be identical in the presence of pure intermediate products. This implies that those traditional theorems in trade theory that depend exclusively on the nature of the differences between the factor intensities in the two final products may no longer be valid in the model that allows for the presence of pure intermediate products, even though these theorems continued to be valid in the model with inter-industry flows.
KeywordsHome Country Free Trade Technical Progress Final Good Intermediate Good
Unable to display preview. Download preview PDF.
- Batra, R. N., and Casas, F. R., ‘Intermediate Products and the Pure Theory of International Trade: A Neo-Heckscher-Ohlin Framework’, American Economic Review, lxiii (June 1973).Google Scholar
- Casas, F. R., ‘Pure Intermediate Products, Factor Intensities and Technical Progress in the Theory of International Trade’, Southern Economic Journal, xxxix (July 1972).Google Scholar
- Batra, R. N., and Singh, R., ‘The Intermediate Products and the Two-Sector Growth Model’, paper presented at the Econometric Society Meetings, Detroit (Dec 1970 ).Google Scholar
- Kuo, C., ‘A Two-Sector Growth Model with an Intermediate Product in an Open Economy’, Ph.D. dissertation, Department of Economics, Univ. of Western Ontario (Apr 1972).Google Scholar