Some notes on the effects of trade in intermediates products on the patterns of specialization

DAVIDE VILLANI; BRONDINO, GABRIEL

Juiz de Fora

Conferencia; 26th International Input-Output Association Conference; 2018

International Input-Output Association

In Ricardian models in which only trade in final goods is allowed, an important criterion to determine in which sector each country will specialize is to compare relative unit labor requirements against relative wages. If trade in intermediate products is also allowed, to what extent does this criterion still holds? In a recent paper, Baldone, Sdogati, and Tajoli have show, using a numerical example, that, in such context, if this criterion is followed, the pattern of specialization may not lead to minimum international prices. Our purpose is to provide a more formal treatment and analyze the theoretical conditions under which the criterion ceases to hold