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Globalization and specialization

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  • Eckel, Carsten

Abstract

The popular Dixit-Stiglitz-Ethier framework proposes that globalization increases the menu of intermediate goods available to downstream firms and that gains from specialization raise welfare unambiguously. This study shows that both results depend critically on the assumption that demand elasticities are invariable. The more general framework presented here provides two main insights: First, whether specialization rises or falls depends ultimately on the shape of the cost function, and second, globalization can actually reduce welfare in the case when specialization falls.

Suggested Citation

  • Eckel, Carsten, 2008. "Globalization and specialization," Munich Reprints in Economics 20533, University of Munich, Department of Economics.
    • Handle: RePEc:lmu:muenar:20533
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    References listed on IDEAS

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    Cited by:

    1. Rabah Amir & Jim Y. Jin & Michael Troge, 2015. "Free Trade vs. Autarky under Asymmetric Cournot Oligopoly," Discussion Paper Series, School of Economics and Finance 201509, School of Economics and Finance, University of St Andrews.
    2. Epifani, Paolo & Gancia, Gino, 2011. "Trade, markup heterogeneity and misallocations," Journal of International Economics, Elsevier, vol. 83(1), pages 1-13, January.
    3. Cheng-Te Lee & Deng-Shing Huang, 2017. "Asymmetric Globalization and Specialization," IEAS Working Paper : academic research 17-A004, Institute of Economics, Academia Sinica, Taipei, Taiwan.
    4. Rabah Amir & Jim Y. Jin & Michael Tröge, 2017. "Free Trade versus Autarky under Asymmetric Cournot Oligopoly," Review of International Economics, Wiley Blackwell, vol. 25(1), pages 98-107, February.
    5. Swati Dhingra & John Morrow, 2019. "Monopolistic Competition and Optimum Product Diversity under Firm Heterogeneity," Journal of Political Economy, University of Chicago Press, vol. 127(1), pages 196-232.
    6. Bertoletti, Paolo & Fumagalli, Eileen & Poletti, Clara, 2017. "Price-cost margins and firm size under monopolistic competition: The case of IES preferences," Research in Economics, Elsevier, vol. 71(4), pages 653-662.
    7. Xiang Gao & Sandy Dall'erba & Brenna Ellison & Andre F. T. Avelino & Cuihong Yang, 2022. "When one cannot bypass the byproducts: Plastic packaging waste embedded in production and export," Journal of Industrial Ecology, Yale University, vol. 26(4), pages 1460-1474, August.
    8. Hua Zhou & Jiachen Fan, 2023. "Export structure, import demand elasticity and export stability," The World Economy, Wiley Blackwell, vol. 46(3), pages 758-790, March.
    9. Grazia Calabrò & Simone Vieri, 2015. "Political Actions Oriented to Territorial Development: The Multifunctional Role of Agriculture," The AMFITEATRU ECONOMIC journal, Academy of Economic Studies - Bucharest, Romania, vol. 17(S9), pages 1346-1346, November.
    10. Jaap W. B. Bos & Claire Economidou & Lu Zhang, 2020. "Specialization in the presence of trade and financial openness," Empirical Economics, Springer, vol. 58(6), pages 2783-2816, June.
    11. Anu Kovarikova Arro, 2005. "Globalization, Increasing Returns in Component Production, and the Pattern of Trade," CERGE-EI Working Papers wp265, The Center for Economic Research and Graduate Education - Economics Institute, Prague.
    12. Ari Van Assche, 2006. "Modularity and the Organization of International Production," CIRANO Working Papers 2006s-09, CIRANO.
    13. Duarte, Rosa & Espinosa-Gracia, Adrián & Jiménez, Sofía & Sánchez-Chóliz, Julio, 2022. "New insights on the relationship between the involvement of countries in global value chains, and intra- and inter-country inequalities," Structural Change and Economic Dynamics, Elsevier, vol. 63(C), pages 320-329.
    14. Sèna Kimm Gnangnon, 2022. "Export diversification and financial openness," International Economics and Economic Policy, Springer, vol. 19(4), pages 675-717, October.
    15. Bos, J.W.B. & Economidou, C. & Zhang, L., 2011. "Specialization in the presence of trade and financial integration: explorations of the integration-specialization nexus," Research Memorandum 026, Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR).
    16. Grazia Calabrò & Simone Vieri, 2015. "Political Actions Oriented to Territorial Development: The Multifunctional Role of Agriculture," The AMFITEATRU ECONOMIC journal, Academy of Economic Studies - Bucharest, Romania, vol. 17(Special 9), pages 1346-1346, November.

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