Abstract
This article develops a dual general equilibrium model to analyze the effects of intra-industry trade in both intermediate goods and final goods on the productivity in the final good production. Intra-industry trade in intermediate goods determines an increase in the number of intermediate good varieties available in the final good production, and intra-industry trade in final goods determines a reduction in the number of adaptations of an intermediate good to the final good production. Thereby, the productivity in the final good production increases. Different shares of intra-industry trade in intermediate goods and final goods in a general equilibrium setting implies that Jones' “magnification effect” and both the Rybczynski theorem and the Stolper-Samuelson theorem are not valid.
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