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- W3209762912 abstract "This article analyses the so-called trade-in-tasks models based upon the Heckscher-Ohlin theory recently developed to explain the process of fragmentation. These models continue to rely on comparative advantage to determine trade patterns. The notion of comparative advantage rests on the basic assumption that countries trade only finished goods whose production is domestically integrated. However, since fragmentation implies an increasing trade in intermediate and capital goods and domestic disintegration of production, it does not seem easy to see how comparative advantage continues to work. We identify two crucial assumptions behind these models that allow the principle to work: first, there is a strict distinction between intermediate and finished goods; second, intermediate inputs do not enter the production of themselves. One could relax these assumptions and consider circular production instead. Even so, we identify a third assumption: the neglect of payment of an interest rate over the value of inputs advanced in production. We relax this assumption and consider international capital mobility to show that comparative advantage fails to predict the trade pattern. Therefore, the Heckscher-Ohlin theory is incompetent to explain fragmentation and modern trade patterns." @default.
- W3209762912 created "2021-11-08" @default.
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- W3209762912 date "2021-10-29" @default.
- W3209762912 modified "2023-10-07" @default.
- W3209762912 title "Fragmentation of Production, Comparative Advantage, and the Heckscher-Ohlin Theory" @default.
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- W3209762912 doi "https://doi.org/10.1080/09538259.2021.1977540" @default.
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