Vertical specialization and the changing nature of world trade
AbstractA major feature of globalization has been the enormous increase in international flows of goods and services: countries are now trading much more with each other. In this article, the authors demonstrate the greater role vertical specialization is playing in these increased flows. Vertical specialization occurs when a country uses imported intermediate parts to create a good it later exports--that is, the country links sequentially with other countries to produce a final good. Deriving evidence from four case studies as well as OECD input-output tables, the authors reveal that vertical specialization has accounted for a large and increasing share of international trade over the last several decades. They also note that because the trends encouraging vertical specialization--lower trade barriers and improvements in transportation and communications technologies--are likely to continue, this type of international trade should become even more prevalent in the next century.
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Bibliographic InfoArticle provided by Federal Reserve Bank of New York in its journal Economic Policy Review.
Volume (Year): (1998)
Issue (Month): Jun ()
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- James R. Markusen, 1997. "Trade versus Investment Liberalization," NBER Working Papers 6231, National Bureau of Economic Research, Inc.
- Andrew K. Rose, 1990.
"Why has trade grown faster than income?,"
International Finance Discussion Papers
390, Board of Governors of the Federal Reserve System (U.S.).
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