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Trade Verticality and Structural Change in Industries:The Cases of Taiwan and South Korea

  • Hung-Yi Chen

    ()

  • Yang-Ming Chang

    ()

This paper documents that a significant portion of trade for Taiwan and Korea follows the trend of world trade in moving toward a pattern of vertical specialization (VS). Noteworthy is the manufacturing sector, whose VS shares of exports has been steadily increasing and has accounted for more than 90% of the total VS shares of manufactured exports. For Taiwan, nearly 57% of the growth in exports is contributed by the growth in VS-based trade; for Korea, it is as high as 64%. In the analysis, we compare VS shares of exports with or without input-output circulation among domestic industries in an open economy. Using Taiwan as a case study, we further discuss the implications of trade liberalization through tariff reductions for trade verticality. Copyright Springer Science + Business Media, LLC 2006

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File URL: http://hdl.handle.net/10.1007/s11079-006-9052-y
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Article provided by Springer in its journal Open Economies Review.

Volume (Year): 17 (2006)
Issue (Month): 3 (July)
Pages: 321-340

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Handle: RePEc:kap:openec:v:17:y:2006:i:3:p:321-340
Contact details of provider: Web page: http://www.springerlink.com/link.asp?id=100323

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  1. 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.
  2. Yeats, Alexander J., 1998. "Just how big is global production sharing?," Policy Research Working Paper Series 1871, The World Bank.
  3. Dornbusch, Rudiger & Fischer, Stanley & Samuelson, Paul A, 1977. "Comparative Advantage, Trade, and Payments in a Ricardian Model with a Continuum of Goods," American Economic Review, American Economic Association, vol. 67(5), pages 823-39, December.
  4. Baier, Scott L. & Bergstrand, Jeffrey H., 2001. "The growth of world trade: tariffs, transport costs, and income similarity," Journal of International Economics, Elsevier, vol. 53(1), pages 1-27, February.
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