For the OECD as whole, as well as for the U.S., manufacturing exports have been rising, while manufacturing output (both expressed as a share of total GDP) has been falling. We examine the prevalence of this puzzling fact across individual OECD countries, as well as for particular sub-industries of manufacturing. We then address whether the standard international trade paradigms are capable of quantitatively resolving the puzzle. We extend the basic monopolistic competition-cum-Heckscher-Ohlin model to allow for non-homothetic preferences, non-unitary demand elasticities and for changing trade barriers and country-size distributions over time. In a calibrated version of the model, we find that while the extended model can replicate the puzzle qualitatively, it cannot do so quantitatively. We suggest that the unexplained part of the puzzle may be due to vertical specialization – the phenomenon by which countries specialize in particular stages of a good’s production sequence – leading to “back-and-forth” trade, and creating a distinction between ‘gross’ trade and value-added trade. The standard trade paradigms only include value-added trade.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
page. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
Publisher Info
Paper provided by Centro de Economía Aplicada, Universidad de Chile in its series Documentos de Trabajo with number
178.
Length: Date of creation: 2004 Date of revision: Handle: RePEc:edj:ceauch:178
Contact details of provider:
For technical questions regarding this item, or to correct its listing, contact: () The email address of this maintainer does not seem to be valid anymore. Please ask to update the entry or send us the correct address..
References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.: