Interacting factor endowments and trade costs: a multi-country, multi-good approach to trade theory

James R. Markusen, Anthony J. Venables

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33 Citations (Scopus)


We provide a synthetic analysis of the different ways in which countries participate in the world economy. Classic trade questions are reconsidered by generalizing a factor-proportions model to multiple countries, multiple goods or multi-stage production, and country-specific trade costs. Each country's production specialization, trade and welfare is determined by the interaction between its relative endowment and its trade costs. We consider the effects of allowing one good to 'fragment' into component and assembly production. The volume of trade and welfare levels are higher with fragmentation for most countries, although for many countries these variables fall with fragmentation.

Original languageEnglish
Pages (from-to)333-354
Number of pages22
JournalJournal of International Economics
Issue number2
Publication statusPublished - Nov 2007
Externally publishedYes


  • Fragmentation
  • Multi-country
  • Trade costs
  • Volume of trade

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