Trade in producer services and the realization of increasing returns due to specialization

This dissertation focuses on the formal analysis of international trade in producer services. It formulates general-equilibrium models which incorporate an explicit role for services in the production process, placing particular emphasis on the relationship between producer services and the degree of specialization in production. These models are used to analyze the determinants of trade in services and the effects which liberalization of trade in services has on specialization within firms. While increasing returns due to specialization have been discussed in the recent trade literature, the role which producer services play in limiting the degree of specialization and the relationship between specialization and the scale of individual firms have not.;A model of production is developed that exhibits increasing returns due to specialization. It assumes that a number of different production techniques are available to firms. These techniques involve different levels of specialization of the basic activities in which firms are engaged. The selection of a given production technique is limited, in part, by coordination and control requirements that increase with the complexity of the production process. The degree of specialization is also limited by the scale of the production unit.;Increasing returns imply imperfect competition. The models in this dissertation focus on Chamberlinian monopolistic competition. Emphasis is placed on specialization within firms. The recent literature on increasing returns due to specialization has focused on perfectly competitive final product markets and monopolistically competitive intermediate goods markets. This incorporation of imperfect final product markets allows us to focus on individual firms. This approach leads to some rich results relating trade in services and growth to the degree of specialization within individual production units, product prices, product variety, the scale of production, and the extent of the market.