A COMPARISON OF SPECIALIZATION GAINS FROM TRADE IN FINAL AND INTERMEDIATE GOODS

This paper sets out a method for measuring and comparing the specialis ation gains from trade in intermediate goods and final goods, based up on a vertically integrated sectors (VIS) modelling approach. The facto r input requirements of domestic production to replace imported interm ediates is compared with the factor requirements of the 'compensating' exports required to purchase the imports. This method is applied to t he UK economy, using a 28 sector model and a breakdown of factor input s into land, labour and capital. Estimates of net factor-usage or savi ng on individual factor (weighted for factor quality differences) and multi-factor bases are reported. The results indicate that trade in in puts and outputs was net labour-using, and net-capital and land-saving in 1979. The overall, or multi-factor, gain from trade in intermediat es was greater than for trade in final goods in 1979, with overall res ource savings of 3.01% and 1.73% respectively.