Trade and Protection with Multistage Production

27 Pages Posted: 4 Mar 2007 Last revised: 4 Sep 2010

See all articles by Avinash Dixit

Avinash Dixit

Princeton University - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute)

Gene M. Grossman

Princeton University - Princeton School of Public and International Affairs; Princeton University - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute); Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)

Date Written: November 1981

Abstract

This paper analyzes trade in manufactured goods that are produced via a vertical production structure with many stages, where some value is added at each to an intermediate product to yield a good-in-process ready for the next stage. We consider the stage at which a good is traded to be an economically endogenous variable, with comparative advantage determining the pattern of production specialization by stages across countries. We study how endowment changes and policy shifts move the margin of comparative advantage, which thus provides a channel for resource allocation adjustment that is additional to the usual ones of factor substitution and changes in the quantity of output.

Suggested Citation

Dixit, Avinash K. and Grossman, Gene M., Trade and Protection with Multistage Production (November 1981). NBER Working Paper No. w0794, Available at SSRN: https://ssrn.com/abstract=967946

Avinash K. Dixit (Contact Author)

Princeton University - Department of Economics ( email )

Princeton, NJ 08544-1021
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CESifo (Center for Economic Studies and Ifo Institute)

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Germany

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Gene M. Grossman

Princeton University - Princeton School of Public and International Affairs ( email )

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Princeton, NJ 08544-1021
United States
609-258-4823 (Phone)
609-258-1374 (Fax)

Princeton University - Department of Economics ( email )

Princeton, NJ 08544-1021
United States

CESifo (Center for Economic Studies and Ifo Institute) ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

Centre for Economic Policy Research (CEPR)

London
United Kingdom

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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