Showing papers on "Factor price published in 2010"

Presidential Address: Asset Price Dynamics with Slow-Moving Capital

Abstract: I describe asset price dynamics caused by the slow movement of investment capital to trading opportunities. The pattern of price responses to supply or demand shocks typically involves a sharp reaction to the shock and a subsequent and more extended reversal. The amplitude of the immediate price impact and the pattern of the subsequent recovery can reflect institutional impediments to immediate trade, such as search costs for trading counterparties or time to raise capital by intermediaries. I discuss special impediments to capital formation during the recent financial crisis that caused asset price distortions, which subsided afterward. After presenting examples of price reactions to supply shocks in normal market settings, I offer a simple illustrative model of price dynamics associated with slow-moving capital due to the presence of inattentive investors. I ADDRESS THE IMPLICATIONS for asset price dynamics of the apparent slow movement of investment capital to trading opportunities. The arrival of new capital to an investment opportunity can be delayed by fractions of a second in some markets, for example an electronic limit-order-book market for equities, or by months in other markets, such as that for catastrophe risk insurance. Accordingly, prices respond to supply or demand shocks with a sharp reaction because of the relatively small subset of capital (and thus risk-bearing capacity) that is immediately available to absorb a shock on short notice. Such a price impact is substantially reversed over time as additional capital becomes available. The amplitude of the immediate price impact and the pattern of the subsequent recovery can reflect many sorts of attention costs to trade as well as institutional impediments to capital movement, such as search costs for trading

Microeconomic Evidence on Price-Setting

Abstract: The last decade has seen a burst of micro price studies. Many studies analyze data underlying national CPIs and PPIs. Others focus on more granular subnational grocery store data. We review these studies with an eye toward the role of price setting in business cycles. We summarize with ten stylized facts: prices change at least once a year, with temporary price discounts and product turnover often playing an important role. After excluding many short-lived prices, prices change closer to once a year. The frequency of price changes differs widely across goods, however, with more cyclical goods exhibiting greater price flexibility. The timing of price changes is little synchronized across sellers. The hazard (and size) of price changes does not increase with the age of the price. The cross-sectional distribution of price changes is thick-tailed, but contains many small price changes too. Finally, strong linkages exist between price changes and wage changes.

Asset Price Misalignments and the Role of Money and Credit

Abstract: This paper contributes to the analysis on the properties of money and credit indicators for detecting asset price misalignments. After a literature review, the paper discusses several approaches useful for detecting asset price busts. Considering a sample of 17 Organization for Economic Cooperation and Development industrialized countries and the euro area over the period 1969 Q1–2008 Q3, an asset price composite indicator incorporating developments in both stock and house price markets is constructed and a criterion to identify the periods characterized by asset price busts is proposed. The empirical analysis is based on a pooled probit-type approach with several monetary, financial and real variables. According to statistical tests, credit aggregates (either in terms of annual changes or growth gap), changes in nominal long-term interest rates and investment-to-GDP ratios jointly with either house or stock price dynamics turn out to be the best indicators helping to forecast asset price busts up to eight quarters in advance. Some robustness checks indicate that both the method used to identify asset price busts and the choice of the binary variable are reliable.

Assessing Spatial Equity and Efficiency Impacts of Transport Infrastructure Projects

Abstract: Policy decisions on transport infrastructure investments often require knowledge of welfare effects generated from using these infrastructures on a detailed regional level. This is in particular true for the EU initiative promoting the development of the trans-European transport (TEN-T) networks. As projects within this initiative affect regions in different countries, incentive compatible financing schemes cannot be designed without knowing where the benefits accrue. Furthermore, this initiative is also intended to contribute to the cohesion objective on a community scale, and only with regional impact studies one can assess to which extent these objectives are attained. As standard cost-benefit analysis is unable to assign benefits to eventual beneficiaries in the economy, we develop and apply a spatial computable general equilibrium (SCGE) model as a suitable alternative. The model has a household sector and a production sector with two industries, one producing local goods, the other producing tradables. Regions interact through costly trade, with trade costs depending, among others, on the state of the infrastructure. New links reduce trade costs, which changes trade flows, production, goods prices and factor prices and thus eventually the welfare of households in different regions. We present the formal structure of the model, the calibration procedure and the data sources for calibrating the model and estimating the trade cost reductions stemming from new transport links. As the model is only able to quantify effects related to trade in goods we also suggest a simplified approach to add effects stemming from passenger transport. We apply the methods to a policy experiment related to the TEN-T priority list of projects. We quantify project by project the social return, check whether significant benefit spillovers to countries not involved in financing might prevent realization of projects in spite of their respective profitability from European wide point of view, and finally we evaluate the contribution of each project to the spatial cohesion objective. Our results confirm sceptical views on EU involvement in infrastructure policy that have been expressed in the literature.

The Structural Manifestation of the 'Dutch Disease’: The Case of Oil Exporting Countries

Abstract: This study derives structural implications of the Dutch disease in oil-exporting countries due to permanent oil price shocks from a typical model. We then test these implications in manufacturing sector data across a wide group of countries including oil-exporters covering 1977 to 2004. The results on oil-exporting countries are four folds. First, we find that permanent increases in oil price negatively impact output in manufacturing as consistent with the Dutch disease. Second, Evidence in the data shows that oil windfall shocks have a stronger impact on manufacturing sectors in countries with more open capital markets to foreign investment. Third, we find that the relative factor price of labor to capital, and capital intensity in manufacturing sectors appreciate as windfall increases. Fourth, we find that manufacturing sectors with higher capital intensity are less affected by windfall shocks than their peers, possibly due to a larger share of the effect being absorbed by more laborintensive tradable sectors. An implication of the fourth result is that having diverse manufacturing sectors in capital intensity helps cushion the volatility of oil shocks.

Optimal price setting with observation and menu costs

Abstract: We study the price setting problem of a firm in the presence of both observation and menu costs. In this problem the firm optimally decides when to collect costly information on the adequacy of its price, an activity which we refer to as a price ``review''. Upon each review, the firm chooses whether to adjust its price, subject to a menu cost, and when to conduct the next price review. This behavior is consistent with recent survey evidence documenting that firms revise prices infrequently and that only a few price revisions yield a price adjustment.The goal of the paper is to study how the firm's choices map into several observable statistics, depending on the level and relative magnitude of the observation vs the menu cost. The observable statistics are: the frequency of price reviews, the frequency of price adjustments, the size-distribution of price adjustments, and the shape of the hazard rate of price adjustments. We provide an analytical characterization of the firm's decisions and a mapping from the structural parameters to the observable statistics. We compare these statistics with the ones obtained for the models with only one type of cost. The predictions of the model can, with suitable data, be used to quantify the importance of the menu cost vs. the information cost. We also consider a version of the model where several price adjustment are allowed between observations, a form of price plans or indexation. We find that no indexation is optimal for small inflation rates.

Food security in an era of economic volatility.

Abstract: This article analyzes international commodity price movements, assesses food policies in response to price fluctuations, and explores the food security implications of price volatility on low-income groups. It focuses specifically on measurements, causes, and consequences of recent food price trends, variability around those trends, and price spikes. Combining these three components of price dynamics shows that the variation in real prices post-2000 was substantially greater than that in the 1980s and 1990s, and was approximately equal to the extreme volatility in commodity prices that was experienced in the 1970s. Macro policy, exchange rates, and petroleum prices were important determinants of price variability over 2005–2010, highlighting the new linkages between the agriculture-energy and agriculture-finance markets that affect the world food economy today. These linkages contributed in large part to misguided expectations and uncertainty that drove prices to their peak in 2008. The article also argues that there is a long-lasting effect of price spikes on food policy around the world, often resulting in self-sufficiency policies that create even more volatility in international markets. The efforts by governments to stabilize prices frequently contribute to even greater food insecurity among poor households, most of which are in rural areas and survive on the margin of net consumption and net production. Events of 2008—and more recently in 2010—underscore the impact of price variability for food security and the need for refocused policy approaches to prevent and mitigate price spikes.

Beyond a subjective theory of value and towards a ‘fair price’: an organizational perspective on Fairtrade minimum price setting

Abstract: This article explores Fairtrade minimum price setting as an organizational formulation of a critical response to economic liberalism and its underlying notion of value—a subjective theory of value. The aim of the article is to show what happens if such meta-level philosophical debates on fairness and markets are lived out organizationally. This is achieved by using an ethnographic study of the price setting process of the Fairtrade Labelling Organizations. The case unpacks the complexities of defining a ‘fair’ price beyond the principle of marginal utility. I draw on French pragmatist sociology in order to decompose the political and moral constructions that underpin the organizational practices of minimum price setting. Challenging the assumption of free choice in neo-classical economics, Fairtrade redefines not only how value should be calculated, but also what it is it that should be valued and who values. This makes visible the political confrontation at the point of price determination, notably by pr...

Impact of European pharmaceutical price regulation on generic price competition: a review.

Abstract: Although economic theory indicates that it should not be necessary to intervene in the generic drug market through price regulation, most EU countries intervene in this market, both by regulating the maximum sale price of generics (price cap) and by setting the maximum reimbursement rate, especially by means of reference pricing systems. We analyse current knowledge of the impact of direct price-cap regulation of generic drugs and the implementation of systems regulating the reimbursement rate, particularly through reference pricing and similar tools, on dynamic price competition between generic competitors in Europe. A literature search was carried out in the EconLit and PubMed databases, and on Google Scholar. The search included papers published in English or Spanish between January 2000 and July 2009. Inclusion criteria included that studies had to present empirical results of a quantitative nature for EU countries of the impact of price capping and/or regulation of the reimbursement rate (reference pricing or similar systems) on price dynamics, corresponding to pharmacy sales, in the generic drug market. The available evidence indicates that price-cap regulation leads to a levelling off of generic prices at a higher level than would occur in the absence of this regulation. Reference pricing systems cause an obvious and almost compulsory reduction in the consumer price of all pharmaceuticals subject to this system, to a varying degree in different countries and periods, the reduction being greater for originator-branded drugs than for generics. In several countries with a reference pricing system, it was observed that generics with a consumer price lower than the reference price do not undergo price reductions until the reference price is reduced, even when there are other lower-priced generics on the market (absence of price competition below the reference price). Beyond the price reduction forced by the price-cap and/or reference pricing regulation itself, the entry of new generic competitors is useful for lowering the real transaction price of purchases made by pharmacies (dynamic price competition at ex-factory level), although this effect is weaker or non-significant for official ex-factory prices and consumer prices in some countries. When maximum reimbursement systems such as reference pricing or similar types are applied, pharmacies are seen to receive large discounts on the price they pay for the pharmaceuticals, although these discounts are not transferred to the consumer price. The percentage discount offered to pharmacies in a country that uses a price-cap system combined with reference pricing is positively and significantly related to the number of generic competitors in the market for the pharmaceutical (dynamic price competition at ex-factory level).

Price setting behaviour in the Netherlands: results of a survey

Abstract: Using a survey among Dutch firms on price setting behaviour in the Netherlands the study identifies how sticky prices are, which prices are sticky and why they are sticky. The most distinctive feature of the Dutch survey is its broad coverage of the business community (seven sectors and seven size classes), including the service sector and small firms. Our primary finding is that price setting behaviour depends critically on both a firm's size and the competitive environment it faces. Small firms in particular adopt more rigid pricing policies, and the weaker the competition a firm faces, the stickier a company's price will be. Furthermore, we find that wholesale and retail prices are more flexible than those for business-to-business services. The survey suggests that explicit and informal contracting are the most important sources of price stickiness. Menu costs and psychological pricing—two prominent explanations of price stickiness in the literature—are of minor importance. Finally, there is clear evidence of asymmetries in shocks driving price increases and decreases. Copyright © 2009 John Wiley & Sons, Ltd.

List Prices, Sale Prices and Marketing Time: An Application to U.S. Housing Markets

Abstract: ∗∗∗ ∗∗∗ ∗∗∗∗ Many goods are marketed after first stating a list price, with the expectation that the eventual sales price will differ. In this article, we first present a simple model of search behavior that includes the seller setting a list price. Holding constant the mean of the buyers’ distribution of potential offers for a good, we assume that the greater the list price, the slower the arrival rate of offers but the greater is the maximal offer. This trade-off determines the optimal list price, which is set simultaneously with the seller’s reservation price. Comparative statics are derived through a set of numerical sensitivity tests, where we show that the greater the variance of the distribution of buyers’ potential offers, the greater is the ratio of the list price to expected sales price. Thus, sellers of atypical goods will tend to set a relatively high list price compared with standard goods. We test this hypothesis using data from the Columbus, Ohio, housing market and find substantial support. We also find empirical support for another hypothesis of the model: atypical dwellings take longer to sell. Although the theory of how the seller of an asset searches for a buyer is well developed,ithasfocusedlessfrequentlyonhowlist(ask)pricesaredetermined. However, setting a list price that differs from the expected selling price is a common occurrence in the U.S. economy. One of the largest such examples is the housing market. In 2007, 6.43 million existing and new homes were sold, each having a seller-determined list price. 1 In the vast majority of cases, the list price exceeded the sales price. Setting a list price that differs from the expected sales price also is common for automobiles and the fine art market and it occurs in some Internet auctions.

Housing supply, land costs and price adjustment

Abstract: We analyze relationships between housing supply elasticities, land costs and house price dynamics, contributing three main insights. First, higher housing supply elasticities help contain short-run price spikes following demand shocks. Second, land price dynamics influence this relationship; supply responses are lessened and house price spikes are exacerbated as land prices increase. Third, we estimate a system of regional equations modeling housing supply using a Tobin's-q specification (incorporating construction and land costs) and show that regional price dynamics are a function of the region's supply elasticity.

Why Higher Price Sensitivity of Consumers May Increase Average Prices: An Analysis of the European Electricity Market

Abstract: We develop a model of the European electricity market that allows analyzing the impact of consumers' price sensitivity, defined as the willingness to change energy providers, on equilibrium prices. The model is parameterized with publicly available data on total demand, marginal costs and capacity constraints of power generators. Comparably precise data on the price sensitivity is not available, so that we analyze its impact in a range of simulations. Contrary to apparently straightforward expectations, we find that a higher price sensitivity increases average prices under reasonable assumptions. The reason is that, when price sensitivity is high, the most efficient energy providers can attract sufficiently many consumers for operating at full capacity, even when price differences to their less efficient competitors are small. Hence, incentives to reduce prices are higher when the price sensitivity is low. We conclude that the widespread view that high electricity prices can (partially) be attributed to a low willingness of consumers to change their providers is flawed.

Is that deal worth my time? The interactive effect of relative and referent thinking on willingness to seek a bargain

Abstract: Prior research on relative thinking has suggested that the willingness to seek a bargain depends not only on the absolute value of the bargain but also on the price of the product. For example, a discount of $10 seems more appealing on a product whose regular price is $20 than a product whose regular price is $60. By invoking the interactive role of consumers' reference prices, the authors delineate the specific conditions under which the same $10 discount can seem less appealing when the price is $20 than when it is $60. They present a formal model that simultaneously incorporates the effects of relative and referent thinking and yields novel predictions, which are supported in four laboratory experiments. Their results reveal that deviation from the reference price determines when relative thinking holds and when it gets reversed. Specifically, the relative-thinking effect holds when the actual price is the same as expected, it reverses when the actual price deviates from the expected price, bu...

Holiday Price Rigidity and Cost of Price Adjustment

Abstract: The Thanksgiving-Christmas holiday period is a major sales period for US retailers. Due to higher store traffic, tasks such as restocking shelves, handling customers’ questions and inquiries, running cash registers, cleaning, and bagging, become more urgent during holidays. As a result, the holiday-period opportunity cost of price adjustment may increase dramatically for retail stores, which should lead to greater price rigidity during holidays. We test this prediction using weekly retail scanner price data from a major Midwestern supermarket chain. We find that indeed, prices are more rigid during holiday periods than non-holiday periods. For example, the econometric model we estimate suggests that the probability of a price change is lower during holiday periods, even after accounting for cost changes. Moreover, we find that the probability of a price change increases with the size of the cost change, during both, the holiday as well as non-holiday periods. We argue that these findings are best explained by higher price adjustment costs (menu cost) the retailers face during the holiday periods. Our data provides a natural experiment for studying variation in price rigidity because most aspects of market environment such as market structure, industry concentration, the nature of long-term relationships, contractual arrangements, etc., do not vary between holiday and nonholiday periods. We, therefore, are able to rule out these commonly used alternative explanations for the price rigidity, and conclude that the menu cost theory offers the best explanation for the holiday period price rigidity.

Pricing strategy and the formation and evolution of reference price perceptions in new product categories

Abstract: This study examines the formation and evolution of reference price perceptions in new product categories. It contributes to our understanding of pricing new products by integrating two important research streams in marketing-reference price theory and the theory of pioneer brand advantage. Prior research has focused solely on products in existing or incrementally new categories, and has typically examined fast-moving consumer goods. Using a cross-sectional experiment to study the formation of reference price perceptions, and a separate, but related, longitudinal experiment to study the evolution of reference price perceptions, the findings suggest that the pioneer brand's initial price defines a consumer's initial reference price, whether the pioneer is following a skimming or a penetration strategy. This effect endures in later time periods where the initial price affects consumer perceptions of value and purchase intention. The study also finds that the pioneer, due to its prototypicality, has a stronger influence on reference price perceptions than the follower, creating a systematic bias to both the formation and evolution of reference price perceptions in new product categories. Thus, reference price perceptions are shaped by what the pioneer does, rather than what the follower does. Furthermore, category-level reference prices exist and explain purchase intention, but do not improve over brand-specific measures in this regard. These findings have implications for pricing strategy and the theory of reference prices. (C) 2010 Wiley Periodicals, Inc.

China's House Price: Affected by Economic Fundamentals or Real Estate Policy?

Abstract: Many theory and empirical literature conclude that house price can reflect economic fundamentals in the long-term. However, by using China’s panel data of 35 main cities stretching from 1998 to 2007, we find that there is no stable relationship between house price and economic fundamentals. House price has deviated upward from the economic fundamentals since government started macro-control of the real estate market. We consider that the mechanism between the house price and economic fundamentals is distorted by China’s real estate policy, especially its land policy. Meanwhile the policy itself is an important factor in explaining the changes of China’s house price. Then we estimate the dynamic panel data model on house price and the variables which are controlled by real estate policy. The result shows: land supply has negative effects on house price; financial mortgages for real estate have positive effects on house price; and the area of housing sold and the area of vacant housing, which reflects the supply and demand of the housing market, has negative effects on house price. We also find some differences in house price influence factor between eastern and mid-western cities. Finally, we propose policy suggestions according to the empirical results.

Why are Gasoline Prices Sticky? A Test of Alternative Models of Price Adjustment

Abstract: Macroeconomic models of business cycles rely on the assumption that …rms adjust prices infrequently to generate the short-run non-neutrality of money documented by the monetary transmission literature. They posit dierent mechanisms to generate price stickiness, with cor- respondingly dierent implications for in‡ation dynamics. Using an autoregressive conditional binomial model, we test which mechanism is most consistent with the pattern of price adjust- ment found in daily wholesale gasoline price data. Our results lead us to reject menu-costs and information processing delays but suggest that strategic considerations related to the idea of "fair pricing"play an important role in accounting for price stickiness.

Input price discrimination when buyers operate in multiple markets

Abstract: This paper revisits third-degree price discrimination when input buyers serve multiple product markets. Such circumstances are prevalent since buyers often use the same input to produce different outputs, and even homogenous outputs are routinely sold through different locations. The typical view is that price discrimination stifles efficiency (and welfare) by resulting in price concessions to less efficient firms. When buyers serve multiple markets, price discrimination leads to price breaks for firms in markets with lower demand. When lower demand markets also have less competition, price discrimination can provide welfare gains by shifting output to less competitive markets.

Oil Price Shocks, Firm Uncertainty and Investment

Abstract: It is found that an oil price shock in interaction with a firm’s stock price volatility has a ‎negative effect on investment by that firm, both in the short and long-term. In the presence of ‎this interaction term, linear variables in oil price shocks are not statistically significant. There is ‎evidence that for the short-term effects of the interaction variable, the particular magnitude of an ‎oil price shock may not be as important as the fact that there is an oil price shock. For the long-‎term effects, however, the magnitude of the oil price shock does matter. Over a longer horizon, ‎oil price shocks depress investment more at firms facing greater uncertainty. An increase in firm ‎stock price volatility continues to reduce the link between sales growth and investment in the ‎presence of oil price shocks as in Bloom et al. (2007).‎

Trade-in-Goods and Trade-in-Tasks: An Integrating Framework

Abstract: Our paper integrates results from trade-in-task theory into mainstream trade theory by developing trade-in-task analogues to the four famous theorems (Heckscher-Ohlin, factor price equalisation, Stolper-Samuelson, and Rybczynski) and showing the standard gains-from-trade theorem does not hold for trade-in-tasks. We show trade-in-tasks creates intraindustry trade in a Walrasian economy, and derive necessary and sufficient conditions for analyzing the impact of trade-in-tasks on wages and production. Extensions of the integrating framework easily accommodate monopolistic competition and two-way offshoring/trade-in-tasks.

Price, inventories and volatility in the global wheat market

Abstract: The study estimates a conditional mean model for international wheat prices and inventories. Endogenous price volatility and exogenous shocks in the price and inventory series are controlled for in estimation. Redressing the empirical linkage between volatility, prices, and inventories is important because volatility increases returns to inventories, which in turn may imply prices. The problem is also important from the regulator perspective, because publicly funded inventory programs have been traditional measures in stabilizing prices and improving food security by providing a buffer against adverse yield shocks and stock-outs. The structural model underlying the estimating equations is based on a dynamic inventory optimization problem. The data suggest that the price of both wheat and wheat inventories is nonstationary and that they are significantly linked to each other in the short run but do not exhibit a stationary long-run equilibrium relationship. Price volatility is an important determinant in the short-run conditional mean processes for both the price and inventories. The pairwise causal relationships have only one direction each. Inventories imply price volatility, price volatility implies price, and price implies inventories, but not vice versa. The parameter estimates suggest that when inventories decrease, price volatility increases. Thus, low inventories have likely been among the necessary conditions, but have not been a sufficient condition by themselves, for the price surge observed in 2008. The price and inventory movements have a significant negative relationship in the very short run, but it is leveled off over time. A decreasing price implies either inventory build-ups or postponement of inventory withdrawals. Overall, the current and past inventory and price movements are not very valuable in predicting the future price movements, and it is likely that the inventory information announced each month is already in the prices.

Can Environmental Sustainability Be Used to Manage Energy Price Risk

Abstract: Energy security issues and climate change are two of the most pressing problems facing society and both of these problems are likely to increase energy price variability in the coming years. This paper develops and estimates a model of a company’s energy price exposure and presents evidence showing that increases in a company’s environmental sustainability lowers its energy price exposure. This result is robust across two different measures of energy prices. These results should be useful to companies seeking new ways of addressing energy price risk as well as governments concerned about the impact that energy price risk can have on economic growth and prosperity.

A simple test for distinguishing between internal reference price theories

Abstract: A large literature demonstrates the empirical importance of internal reference price effects. There are several theories regarding how and why these effects arise. We offer a simple test that distinguishes between the two leading theories based on economically rational behavior: price as a signal of quality and price as a predictor of future prices. Our test builds on differences in how past consumer purchases interact with internal reference prices. We first validate the reliability of our test by applying it to synthetic data. We then apply our test to purchases of ketchup and diapers and find: (1) quality signaling is the dominant mechanism behind reference price effects in both categories; (2) consistent with the quality-signaling theory, reference price effects diminish as various measures of consumer experience increase; but (3) in both categories there are many individuals for whom price-prediction effects dominate quality-signaling effects.

The Structural Manifestation of the ‘Dutch Disease’; The Case of Oil Exporting Countries

Abstract: This study derives structural implications of the Dutch disease in oil-exporting countries due to permanent oil price shocks from a typical model. We then test these implications in manufacturing sector data across a wide group of countries including oil-exporters covering 1977 to 2004. The results on oil-exporting countries are four folds. First, we find that permanent increases in oil price negatively impact output in manufacturing as consistent with the Dutch disease. Second, Evidence in the data shows that oil windfall shocks have a stronger impact on manufacturing sectors in countries with more open capital markets to foreign investment. Third, we find that the relative factor price of labor to capital, and capital intensity in manufacturing sectors appreciate as windfall increases. Fourth, we find that manufacturing sectors with higher capital intensity are less affected by windfall shocks than their peers, possibly due to a larger share of the effect being absorbed by more laborintensive tradable sectors. An implication of the fourth result is that having diverse manufacturing sectors in capital intensity helps cushion the volatility of oil shocks.

Trade-in-goods and trade-in-tasks: An Integrating Framework

Abstract: Our paper integrates results from trade-in-task theory into mainstream trade theory by developing trade-in-task analogues to the four famous theorems (Heckscher-Ohlin, factor price equalisation, Stolper-Samuelson, and Rybczynski) and showing the standard gains-from-trade theorem does not hold for trade-in-tasks. We show trade-in-tasks creates intraindustry trade in a Walrasian economy, and derive necessary and sufficient conditions for analyzing the impact of trade-in-tasks on wages and production. Extensions of the integrating framework easily accommodate monopolistic competition and two-way offshoring/trade-in-tasks.