Trade elasticity and vertical specialisation
This paper shows that vertical specialisation can increase the elasticity of trade to income, hence explaining dramatic events such as the great trade collapse. We argue that a change in the extent of vertical specialisation affects the elasticity of trade to income, while a mere change in global production levels for a given extent of vertical specialisation does not. In the model we show that only large demand shocks induce firms to vary the extent of vertical specialisation. Using panel data starting from the late 1990s that include the 2008-09 global crisis, we consistently find that the correlation between trade elasticity and vertical specialisation increases precisely in years of large demand shocks, such as the ICT euphoria and the great trade collapse.
|Date of creation:||Jul 2013|
|Date of revision:|
|Contact details of provider:|| Postal: |
Web page: http://www.bancaditalia.it
More information through EDIRC
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.:
- Calista Cheung & Stéphanie Guichard, 2009. "Understanding the World Trade Collapse," OECD Economics Department Working Papers 729, OECD Publishing.
- Samuel S. Kortum & Jonathan Eaton & Brent Neiman & John Romalis, 2010.
"Trade and the Global Recession,"
DEGIT Conference Papers
c015_002, DEGIT, Dynamics, Economic Growth, and International Trade.
- Jonathan Eaton & Samuel Kortum & Brent Neiman & John Romalis, 2011. "Trade and the Global Recession," NBER Working Papers 16666, National Bureau of Economic Research, Inc.
- Jonathan Eaton & Sam Kortum & Brent Neiman & John Romalis, 2010. "Trade and the global recession," Working Paper Research 196, National Bank of Belgium.
- Sam Kortum & John Romalis & Brent Neiman & Jonathan Eaton, 2010. "Trade and the Global Recession," 2010 Meeting Papers 1340, Society for Economic Dynamics.
- Eaton, Jonathan & Kortum, Sam & Neiman, Brent & Romalis, John, 2013. "Trade and the Global Recession," Working Papers 2013-21, University of Sydney, School of Economics.
- Dixit, Avinash K & Stiglitz, Joseph E, 1975.
"Monopolistic Competition and Optimum Product Diversity,"
The Warwick Economics Research Paper Series (TWERPS)
64, University of Warwick, Department of Economics.
- Dixit, Avinash K & Stiglitz, Joseph E, 1977. "Monopolistic Competition and Optimum Product Diversity," American Economic Review, American Economic Association, vol. 67(3), pages 297-308, June.
- Bussière, Matthieu & Chudik, Alexander & Sestieri, Giulia, 2009.
"Modelling global trade flows: results from a GVAR model,"
Working Paper Series
1087, European Central Bank.
- Matthieu Bussière & Alexander Chudik & Giulia Sestieri, 2012. "Modelling global trade flows: results from a GVAR model," Globalization and Monetary Policy Institute Working Paper 119, Federal Reserve Bank of Dallas.
- Kei-Mu Yi & Rudolfs Bems & Robert C. Johnson, 2010.
"Demand Spillovers and the Collapse of Trade in the Global Recession,"
IMF Working Papers
10/142, International Monetary Fund.
- Rudolfs Bems & Robert C Johnson & Kei-Mu Yi, 2010. "Demand Spillovers and the Collapse of Trade in the Global Recession," IMF Economic Review, Palgrave Macmillan, vol. 58(2), pages 295-326, December.
- Logan Lewis & Linda Tesar & Andrei Levchenko, 2010.
"The Collapse of International Trade During the 2008-2009 Crisis: In Search of the Smoking Gun,"
2010 Meeting Papers
109, Society for Economic Dynamics.
- Andrei A. Levchenko & Logan Lewis & Linda L. Tesar, 2009. "The Collapse of International Trade During the 2008-2009 Crisis: In Search of the Smoking Gun," Working Papers 592, Research Seminar in International Economics, University of Michigan.
- Andrei A. Levchenko & Logan T. Lewis & Linda L. Tesar, 2010. "The Collapse of International Trade During the 2008-2009 Crisis: In Search of the Smoking Gun," NBER Working Papers 16006, National Bureau of Economic Research, Inc.
- Escaith, Hubert & Lindenberg, Nannette & Miroudot, Sébastien, 2010.
"International Supply Chains and Trade Elasticity in Times of Global Crisis,"
20478, University Library of Munich, Germany.
- Escaith, Hubert & Lindenberg, Nannette & Miroudot, Sébastien, 2010. "International supply chains and trade elasticity in times of global crisis," WTO Staff Working Papers ERSD-2010-08, World Trade Organization (WTO), Economic Research and Statistics Division.
- 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.
- Burda, Michael C & Dluhosch, Barbara, 2002.
"Cost Competition, Fragmentation, and Globalization,"
Review of International Economics,
Wiley Blackwell, vol. 10(3), pages 424-41, August.
- Barbara Dluhosch & Michael Burda, 2000. "Cost Competition, Fragmentation and Globalization," CESifo Working Paper Series 393, CESifo Group Munich.
- Burda, Michael C. & Dluhosch, Barbara, 2001. "Cost competition, fragmentation and globalization," SFB 373 Discussion Papers 2001,40, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
- Emanuele Breda & Rita Cappariello & Roberta Zizza, 2007.
"Vertical Specialisation in Europe: Evidence from the Import Content of Exports,"
Rivista di Politica Economica,
SIPI Spa, vol. 97(3), pages 189, May-June.
- Emanuele Breda & Rita Cappariello & Roberta Zizza, 2008. "Vertical specialisation in Europe: Evidence from the import content of exports," Temi di discussione (Economic working papers) 682, Bank of Italy, Economic Research and International Relations Area.
- Hubert Escaith, 2010. "Global Supply Chains and the Great Trade Collapse: Guilty or Casualty?," Theoretical and Practical Research in Economic Fields, ASERS Publishing, vol. 0(1), pages 27-41, June.
- Menzie D. Chinn, 2005. "Supply Capacity, Vertical Specialization and Tariff Rates: The Implications for Aggregate U.S. Trade Flow Equations," NBER Working Papers 11719, National Bureau of Economic Research, Inc.
When requesting a correction, please mention this item's handle: RePEc:bdi:wptemi:td_924_13. 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: ()
If references are entirely missing, you can add them using this form.