Complementarity and increasing returns in intermediate inputs

Intra-Industry Trade in Intermediate Products, Pollution and Internationally Increasing Returns

This paper examines the relationship between intra-industry trade in intermediate products, pollution and increasing returns. We develop a two-country model in which production occurs in two stages, final and intermediate good production. Intermediate goods are produced under monopolistic competition and final good production exhibits increasing returns with respect to the number of varieties o...

Imported Inputs , Quality Complementarity , and Skill Demand ∗

This paper analyzes how access to imported inputs affects firms in developing countries, where domestically produced high-quality inputs are relatively costly. We build an O-Ring type model with quality complementarity across input tasks, ranking tasks by their qualitysensitivity. Because high-quality inputs are relatively cheap in international markets, firms use these instead of domestic inpu...

Increasing Returns and Economic Efficiency

This paper argues that, from the viewpoint of Pareto optimality, the industries with increasing returns are under-expanded relative to those without increasing returns and those with higher degrees of increasing returns are under-expanded relative to those with lower degrees. Ignoring administrative and indirect (such as rent-seeking) costs, subsidies on goods produced under conditions of (high...

Planning, Prices and Increasing Returns

Equity, Efficiency and Increasing Returns