Why Is Manufacturing Trade Rising Even as Manufacturing Output is Falling?
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.
(This abstract was borrowed from another version of this item.)
If you experience problems downloading a file, check if you have the proper application to view it first. 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.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 94 (2004)
Issue (Month): 2 (May)
|Contact details of provider:|| Web page: https://www.aeaweb.org/aer/|
More information through EDIRC
|Order Information:||Web: https://www.aeaweb.org/subscribe.html|
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.:
- Antonio Spilimbergo, 1995.
"De-Industrialization and Trade,"
Research Department Publications
4014, Inter-American Development Bank, Research Department.
- Kei-Mu Yi, 2000.
"Can vertical specialization explain the growth of world trade?,"
96, Federal Reserve Bank of New York.
- Kei-Mu Yi, 2003. "Can Vertical Specialization Explain the Growth of World Trade?," Journal of Political Economy, University of Chicago Press, vol. 111(1), pages 52-102, February.
- Donald R. Davis, 1997.
"The Home Market, Trade and Industrial Structure,"
Harvard Institute of Economic Research Working Papers
1800, Harvard - Institute of Economic Research.
- Davis, D.R., 1997. "The Home Market, Trade, and Industrial Structure," Papers 597, Harvard - Institute for International Development.
- Donald R. Davis, 1997. "The Home Market, Trade, and Industrial Structure," NBER Working Papers 6076, National Bureau of Economic Research, Inc.
- Donald R. Davis, 1997. "The home market, trade, and industrial structure," Staff Reports 35, Federal Reserve Bank of New York.
- Raphael Bergoeing & Timothy J. Kehoe, .
"Trade Theory and Trade Facts,"
ILADES-Georgetown University Working Papers
inv129, Ilades-Georgetown University, Universidad Alberto Hurtado/School of Economics and Bussines.
- David L. Hummels & Jun Ishii & Kei-Mu Yi, 1999.
"The nature and growth of vertical specialization in world trade,"
72, Federal Reserve Bank of New York.
- Hummels, David & Ishii, Jun & Yi, Kei-Mu, 2001. "The nature and growth of vertical specialization in world trade," Journal of International Economics, Elsevier, vol. 54(1), pages 75-96, June.
- David L. Hummels & Dana Rapoport & Kei-Mu Yi, 1998. "Vertical specialization and the changing nature of world trade," Economic Policy Review, Federal Reserve Bank of New York, issue Jun, pages 79-99.
- Vanessa Strauss-Kahn, 2003.
"The Role of Globalization in the Within-Industry Shift Away from Unskilled Workers in France,"
NBER Working Papers
9716, National Bureau of Economic Research, Inc.
- Vanessa Strauss-Kahn, 2004. "The Role of Globalization in the Within-Industry Shift Away from Unskilled Workers in France," NBER Chapters, in: Challenges to Globalization: Analyzing the Economics, pages 209-234 National Bureau of Economic Research, Inc.
When requesting a correction, please mention this item's handle: RePEc:aea:aecrev:v:94:y:2004:i:2:p:134-138. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Jane Voros)or (Michael P. Albert)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.