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Impacts of intermediate trade on sector structure

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  • Denis Stijepic
  • Helmut Wagner

Abstract

Structural changes, i.e. long-run changes in the agriculture-manufacturing-services-structure, are a key property of growth and development processes with massive impacts on economy and society and are part of actual debates regarding policy in developing and developed economies. While traditional literature has attempted to explain structural changes by using autarkic models, recent literature has emphasised the importance of deriving theories of structural change using open economy settings. We elaborate on the impacts of intermediate trade on sector structure. In particular, we study how import of intermediate products, which is increasingly feasible due to improvements in transport technology and political integration, affects sector structure in a multi-sector growth model with capital accumulation. This topic has not been studied in the previous literature on structural change in open economies, despite the fact that intermediate imports and capital accumulation are central aspects of modern developing and developed economies. We show that the impacts of intermediate trade on sector structure depend on three factors: productivity gains from trade, specialisation in international trade and development stage. Depending on the constellation of these factors, intermediate trade may accelerate, decelerate or have no effect on structural change. Thus, the effects of intermediate trade may vary strongly across countries.

Suggested Citation

  • Denis Stijepic & Helmut Wagner, 2018. "Impacts of intermediate trade on sector structure," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 27(1), pages 102-122, January.
    • Handle: RePEc:taf:jitecd:v:27:y:2018:i:1:p:102-122
    DOI: 10.1080/09638199.2017.1344725
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    References listed on IDEAS

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    1. Maddison, Angus, 2007. "Contours of the World Economy 1-2030 AD: Essays in Macro-Economic History," OUP Catalogue, Oxford University Press, number 9780199227204.
    2. Angus Maddison, 1995. "Explaining The Economic Performance Of Nations," Books, Edward Elgar Publishing, number 294.
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    Cited by:

    1. Li, Shang-ao & Gong, Liutang & Pan, Shan & Luo, Feng, 2020. "Wage and price differences, technology gap and labor flow dynamics," Economic Modelling, Elsevier, vol. 88(C), pages 211-222.

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