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<p>In this paper, we propose a theoretical model of international trade that delivers substantially larger welfare gains than those implied by standard frameworks. The model emphasizes the role of weak linkages and complementarity across intermediate goods, whereby low productivity in any production stage can constrain aggregate productivity. Using a multi-industry, multi-country general equilibrium framework, we show that complementarity in intermediate inputs significantly amplifies the gains from trade. Quantitatively, using the 2014 WIOD dataset, we find that median welfare gains from trade increase from 30.8 to 138.4% when accounting for trade in intermediate goods. We also show that incorporating cross-industry variation in trade elasticities further magnifies these gains under the complementarity mechanism, reinforcing existing insights in the literature.</p>

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Welfare gains from trade: weak linkages and complementarity of intermediate goods

  • 期刊论文

  • 出版模式：

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  • 发表日期：

    2026年5月22日

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  • Seyed Ali Madanizadeh,
  • Masoud Jabbari

摘要

In this paper, we propose a theoretical model of international trade that delivers substantially larger welfare gains than those implied by standard frameworks. The model emphasizes the role of weak linkages and complementarity across intermediate goods, whereby low productivity in any production stage can constrain aggregate productivity. Using a multi-industry, multi-country general equilibrium framework, we show that complementarity in intermediate inputs significantly amplifies the gains from trade. Quantitatively, using the 2014 WIOD dataset, we find that median welfare gains from trade increase from 30.8 to 138.4% when accounting for trade in intermediate goods. We also show that incorporating cross-industry variation in trade elasticities further magnifies these gains under the complementarity mechanism, reinforcing existing insights in the literature.