Abstract
Kalyan Sanyal was a great student in the Ph.D. program at the University of Rochester in the early 1980s. He was interested in the general phenomenon of international trade in intermediate commodities. At an early stage we had many discussions about where trade should be positioned in the productive spectrum, and our answer was: “In the middle” – some production takes place before trade and some afterwards, hence the “middle products” designation. In this paper I review the major points in our earlier work, and place it in position with what could be considered its pre-cursors and then how, in the past 30 years, economists have taken more seriously the importance of trade in “middle products”, both in terms of new theory about fragmentation and outsourcing and in the mounting evidence that trade in parts and components have shown the most rapid rates of growth. Sanyal’s other work continued this investigation, often with an early use of the “continuum” concept, which has received wide use in more recent research.
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Notes
- 1.
As noted later, the use of the specific factors model in the Input Tier allows the analysis if many middle products are produced in that Tier to be almost as simple as only having a single production activity in the Input Tier.
- 2.
Any increase in L I would result in an outward shift of the transformation curve in the Input Tier.
- 3.
The elasticity of supply is shown as the coefficient of the relative price change in equation (A7) on p. 29 of our AER article.
- 4.
In equation (A7), the numerator would just be the expression (δ L + δ T).
- 5.
The numerator in (A7) expands to [δ L + δ T + θ LIγI/θ L0], with the θ expressions reflecting distributive factor shares and the expression for the elasticity of demand for labor in the Input Tier given by γ I .
- 6.
See Jones (1975).
- 7.
This supply–demand diagram is Fig. 5 in the original AER article.
- 8.
My own paper developed from the job I had refereeing the Kemp paper.
- 9.
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Jones, R.W. (2014). Middle Products Revisited. In: Acharyya, R., Marjit, S. (eds) Trade, Globalization and Development. Springer, India. https://doi.org/10.1007/978-81-322-1151-8_1
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