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Super-Specialization and the Gains from Trade

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Author Info
Sven W. Arndt () (Lowe Institute of Political Economy, Claremont McKenna College)

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Abstract

An important facet of "globalization" is the spread of cross-border production, which is variously known as intra-product specialization, super-specialization, or production fragmentation. This advanced stage in the international division of labor works particularly well between high-wage developed and low-wage emerging economies. But it is precisely this context in which the practice has been criticized for destroying jobs and undermining wages. This paper examines the welfare implications of this type of specialization on the part of labor-intensive, import-competing industries in advanced countries. The results will surprise the skeptics, for when import-competing industries abandon production of labor-intensive components, wages rise and industry employment and output expand. National welfare increases, For a large country, the terms of trade improve, raising national welfare still further.

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Publisher Info
Paper provided by Lowe Institute of Political Economy in its series Working Papers with number 9801.

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Length: 6 pages
Date of creation: 1998
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Publication status: Published in Contemporary Economic Policy, v.16 October 1998 pages 480-485.
Handle: RePEc:loi:wpaper:9801

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Related research
Keywords: fragmentation; cross-border production networks;

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Find related papers by JEL classification:
F11 - International Economics - - Trade - - - Neoclassical Models of Trade
F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

References listed on IDEAS
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  1. Sven W. Arndt, 1997. "Globalization and the Open Economy," Working Papers 9701, Lowe Institute of Political Economy. [Downloadable!]
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Cited by:
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  1. Daniel Horgos, 2007. "Labor Market Effects of International Outsourcing: How Measurement Matters," SOEPpapers 58, DIW Berlin, The German Socio-Economic Panel (SOEP). [Downloadable!]
    Other versions:
  2. Hartmut Egger & Peter Egger, 2002. "How international outsourcing drives up Eastern European wages," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 138(1), pages 83-96, March. [Downloadable!] (restricted)
    Other versions:
  3. Robert C. Feenstra, . "Integration Of Trade And Disintegration Of Production In The Global Economy," Department of Economics 98-06, California Davis - Department of Economics. [Downloadable!]
    Other versions:
  4. Sven W. Arndt, 2001. "Production Networks in an Economically Integrated Region," Working Papers 0103, Lowe Institute of Political Economy. [Downloadable!]
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  5. Robert C. Feenstra & Gordon H. Hanson & Deborah L. Swenson, . "Offshore Assembly From The United States: Production Characteristics Of The 9802 Program," Department of Economics 98-10, California Davis - Department of Economics. [Downloadable!]
    Other versions:
  6. Robert Feenstra & Gordon Hanson, 2001. "Global Production Sharing and Rising Inequality: A Survey of Trade and Wages," NBER Working Papers 8372, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  7. Sven Arndt, 2002. "Production Sharing and Singapore's Global Competitiveness," Claremont Colleges Working Papers 2002-36, Claremont Colleges. [Downloadable!]
    Other versions:
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