IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this paper

The Rise of Vertical Specialization Trade

  • Benjamin Brishman

    (Bureau of Economic Analysis)

Registered author(s):

    Manufacturing and vertical specialization (VS) trade, trade in goods that incorporate imported inputs, has grown rapidly since the 1960s. I argue that declining trade costs are an important explanation for these facts. I present a three stage vertical specialization trade model, with raw materials, manufactured parts and final goods sectors. In the simulated model, falling trade costs explain much of the observed growth in overall and VS trade. Manufacturing trade grows twice as fast as overall trade. Raw materials trade was more important in the 1960s when trade costs were high, since their production is more strongly linked to endowments than manufacturing. Therefore, materials will be traded even when trade costs are high. Trade costs have fallen more for manufactured goods over the last 40 years, leading to a rapid expansion of manufactured parts trade relative to materials.

    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.

    File URL: http://www.bea.gov/papers/pdf/the_rise_of_vertical_specialization_trade_bridgman_benjamin.pdf
    Download Restriction: no

    Paper provided by Bureau of Economic Analysis in its series BEA Working Papers with number 0051.

    as
    in new window

    Length:
    Date of creation: Jan 2010
    Date of revision:
    Handle: RePEc:bea:wpaper:0051
    Contact details of provider: Phone: 202-482-4883
    Web page: http://www.bea.gov/research/index.htm
    Email:


    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.:

    as in new window
    1. Hiau LooiKee & Alessandro Nicita & Marcelo Olarreaga, 2009. "Estimating Trade Restrictiveness Indices," Economic Journal, Royal Economic Society, vol. 119(534), pages 172-199, 01.
    2. Marshall, CBE, FBA, P.J., 2005. "Proceedings of the British Academy, Volume 124. Biographical Memoirs of Fellows, III," OUP Catalogue, Oxford University Press, number 9780197263204, December.
    3. Prema-chandra Athukorala & Nobuaki Yamashita, 2005. "Production Fragmentation and Trade Integration: East Asia in a Global Context," Departmental Working Papers 2005-07, The Australian National University, Arndt-Corden Department of Economics.
    4. Marshall, CBE, FBA, P.J., 2007. "Proceedings of the British Academy, Volume 139, 2005 Lectures," OUP Catalogue, Oxford University Press, number 9780197263945, December.
    5. Gene M. Grossman & Esteban Rossi-Hansberg, 2008. "Trading Tasks: A Simple Theory of Offshoring," American Economic Review, American Economic Association, vol. 98(5), pages 1978-97, December.
    6. Pinelopi K. Goldberg & Amit Khandelwal & Nina Pavcnik & Petia Topalova, 2008. "Imported Intermediate Inputs and Domestic Product Growth: Evidence from India," NBER Working Papers 14416, National Bureau of Economic Research, Inc.
    7. Robert Feenstra, 2003. "Integration Of Trade And Disintegration Of Production In The Global Economy," Working Papers 986, University of California, Davis, Department of Economics.
    8. Raphael Bergoeing & Timothy J. Kehoe & Vanessa Strauss-Kahn & Kei-Mu Yi, 2004. "Why is manufacturing trade rising even as manufacturing output is falling?," Working Papers 04-4, Federal Reserve Bank of Philadelphia.
    9. Marshall, CBE, FBA, P.J, 2007. "Proceedings of the British Academy, Volume 151, 2006 Lectures," OUP Catalogue, Oxford University Press, number 9780197264249, December.
    10. Benjamin Bridgman, 2008. "Energy Prices and the Expansion of World Trade," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 11(4), pages 904-916, October.
    11. Alan M. Taylor & Antoni Estevadeordal, 2009. "Is the Washington Consensus Dead?: Growth, Openness, and the Great Liberalization, 1970s-2000s," IDB Publications (Working Papers) 9298, Inter-American Development Bank.
    12. Hélène Erkel-Rousse & Daniel Mirza, 2002. "Import price elasticities: reconsidering the evidence," Canadian Journal of Economics, Canadian Economics Association, vol. 35(2), pages 282-306, May.
    13. Gene M. Grossman & Esteban Rossi‐Hansberg, 2012. "Task Trade Between Similar Countries," Econometrica, Econometric Society, vol. 80(2), pages 593-629, 03.
    14. David L. Hummels & Jun Ishii & Kei-Mu Yi, 1999. "The nature and growth of vertical specialization in world trade," Staff Reports 72, Federal Reserve Bank of New York.
    15. Susan Chun Zhu & Daniel Trefler, 2000. "Beyond the Algebra of Explanation: HOV for the Technology Age," American Economic Review, American Economic Association, vol. 90(2), pages 145-149, May.
    16. Avinash K. Dixit & Gene M. Grossman, 1981. "Trade and Protection with Multistage Production," NBER Working Papers 0794, National Bureau of Economic Research, Inc.
    17. Arndt, Sven W. & Kierzkowski, Henryk (ed.), 2001. "Fragmentation: New Production Patterns in the World Economy," OUP Catalogue, Oxford University Press, number 9780199243310, December.
    18. 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.
    19. Timothy J. Kehoe & Kim J. Ruhl, 2006. "How Important is the New Goods Margin in International Trade?," 2006 Meeting Papers 733, Society for Economic Dynamics.
    20. Marshall, CBE, FBA, P.J., 2003. "Proceedings of the British Academy, Volume 120, Biographical Memoirs of Fellows, II," OUP Catalogue, Oxford University Press, number 9780197263020, December.
    21. Marshall, CBE, FBA, P.J., 2005. "Proceedings of the British Academy, Volume 131, 2004 Lectures," OUP Catalogue, Oxford University Press, number 9780197263518, December.
    22. Marquis, Milton & Trehan, Bharat, 2010. "Relative productivity growth and the secular "decline" of U.S. manufacturing," The Quarterly Review of Economics and Finance, Elsevier, vol. 50(1), pages 67-74, February.
    23. Johnston, FBA, Ron, 2011. "Proceedings of the British Academy, Volume 166, Biographical Memoirs of Fellows, IX," OUP Catalogue, Oxford University Press, number 9780197264751, December.
    24. George Alessandria & Horag Choi, 2012. "Do falling iceberg costs explain recent U.S. export growth?," Working Papers 12-20, Federal Reserve Bank of Philadelphia.
    25. Mary Amiti & Jozef G Konings, 2005. "Trade Liberalization, Intermediate Inputs, and Productivity; Evidence from Indonesia," IMF Working Papers 05/146, International Monetary Fund.
    26. Douglas A. Irwin, 2007. "Trade Restrictiveness and Deadweight Losses from U.S. Tariffs, 1859-1961," NBER Working Papers 13450, National Bureau of Economic Research, Inc.
    27. Marshall, CBE, FBA, P.J., 2005. "Proceedings of the British Academy Volume 125, 2003 Lectures," OUP Catalogue, Oxford University Press, number 9780197263242, December.
    28. Johnson, Robert C. & Noguera, Guillermo, 2012. "Accounting for intermediates: Production sharing and trade in value added," Journal of International Economics, Elsevier, vol. 86(2), pages 224-236.
    29. Edward L. Glaeser, 2005. "Urban Colossus: Why is New York America's Largest City?," NBER Working Papers 11398, National Bureau of Economic Research, Inc.
    30. Marshall, CBE, FBA, P.J., 2003. "Proceedings of the British Academy, Volume 121, 2002 Lectures," OUP Catalogue, Oxford University Press, number 9780197263037, December.
    Full references (including those not matched with items on IDEAS)

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:bea:wpaper:0051. 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: (Bryn Whitmire)

    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.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.