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Vertical specialization in North–South trade: Industrial relocation, wage and welfare

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  • Hiroshi Kurata
  • Ryoichi Nomura
  • Nobuhito Suga

Abstract

This paper presents a North–South trade model with vertically linked industries and examines how declining costs of trade across stages of production encourage vertical specialization and affect wages and welfare. As trade costs fall below a threshold, the production of all final goods relocates to the South and vertical specialization emerges. In some industries, production of intermediate goods also relocates against comparative costs because of benefits of co‐location, and further declines in trade costs lead to reshoring. A country may temporarily lose from falling trade costs, but both countries can be better off after trade costs fall sufficiently.

Suggested Citation

  • Hiroshi Kurata & Ryoichi Nomura & Nobuhito Suga, 2020. "Vertical specialization in North–South trade: Industrial relocation, wage and welfare," Review of International Economics, Wiley Blackwell, vol. 28(1), pages 119-137, February.
    • Handle: RePEc:bla:reviec:v:28:y:2020:i:1:p:119-137
    DOI: 10.1111/roie.12444
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    Cited by:

    1. Jose Martino Neto & Valerio Antonio Pamplona Salomon & Miguel Angel Ortiz-Barrios & Antonella Petrillo, 2023. "Compatibility and correlation of multi-attribute decision making: a case of industrial relocation," Annals of Operations Research, Springer, vol. 326(2), pages 831-852, July.
    2. Xuhui Ding & Yong Chen & Min Li & Narisu Liu, 2022. "Booster or Killer? Research on Undertaking Transferred Industries and Residents’ Well-Being Improvements," IJERPH, MDPI, vol. 19(22), pages 1-19, November.
    3. Fernando Merino & Cristina Di Stefano & Luciano Fratocchi, 2021. "Back-shoring vs near-shoring: a comparative exploratory study in the footwear industry," Operations Management Research, Springer, vol. 14(1), pages 17-37, June.
    4. Yelin Dai & Yue Liu & Xuhui Ding & Chundu Wu & Yu Chen, 2022. "Environmental Regulation Promotes Eco-Efficiency through Industrial Transfer: Evidence from the Yangtze River Economic Belt in China," IJERPH, MDPI, vol. 19(16), pages 1-31, August.

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