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IT, Production Specialization, and Division of Labor: A Smith-Ricardo Model of International Trade

Abstract

A simple Smith-Ricardo model is developed that incorporates division of labor into the continuum-good Ricardian model of Dornbusch et al.(1977). The trade off between the efficiency gain and coordination cost associated with production specialization de-termines the efficient level of division of labor. The model is applied to explain how the recent IT revolution could affect a country’s efficient level of production specialization and competitive advantage. In particular, absolute advantage (in division of labor) and relative labor supply plays a crucial role in determining the effects of an IT progress on a country’s competitive margin in international trade.

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Paper provided by Carleton University, Department of Economics in its series Carleton Economic Papers with number 03-06.

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Length: 20 pages
Date of creation: 25 Jun 2003
Publication status: Published: Carleton Economic Papers
Handle: RePEc:car:carecp:03-06
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Keywords: Division of labor; Production specialization; Information technology; Coordination cost; International Trade;

Find related papers by JEL classification:

  • F10 - International Economics - - Trade - - - General
  • F11 - International Economics - - Trade - - - Neoclassical Models of Trade

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  1. Romer, Paul M, 1986. "Increasing Returns and Long-run Growth," Journal of Political Economy, University of Chicago Press, vol. 94(5), pages 1002-1037, October.
  2. John McLaren, 2000. ""Globalization" and Vertical Structure," American Economic Review, American Economic Association, vol. 90(5), pages 1239-1254, December.
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  4. Gene M. Grossman & Elhanan Helpman, 2005. "Outsourcing in a Global Economy," Review of Economic Studies, Oxford University Press, vol. 72(1), pages 135-159.
  5. Ronald W. Jones, 2000. "Globalization and the Theory of Input Trade," MIT Press Books, The MIT Press, edition 1, volume 1, number 026210086x, July.
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  8. Gene M. Grossman & Elhanan Helpman, 1991. "Quality Ladders in the Theory of Growth," Review of Economic Studies, Oxford University Press, vol. 58(1), pages 43-61.
  9. Grossman, Gene M & Helpman, Elhanan, 1990. "Comparative Advantage and Long-run Growth," American Economic Review, American Economic Association, vol. 80(4), pages 796-815, September.
  10. Zhao, Laixun, 2001. "Unionization, vertical markets, and the outsourcing of multinationals," Journal of International Economics, Elsevier, vol. 55(1), pages 187-202, October.
  11. Wen Li Cheng & Jeffrey Sachs & Xiaokai Yang, 2005. "An Inframarginal Analysis Of The Ricardian Model," World Scientific Book Chapters,in: An Inframarginal Approach To Trade Theory, chapter 6, pages 87-107 World Scientific Publishing Co. Pte. Ltd..
  12. Romer, Paul M, 1990. "Endogenous Technological Change," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 71-102, October.
  13. Schmitt, Nicolas & Yu, Zhihao, 2001. "Economies of scale and the volume of intra-industry trade," Economics Letters, Elsevier, vol. 74(1), pages 127-132, December.
  14. Robert C. Feenstra, 1998. "Integration of Trade and Disintegration of Production in the Global Economy," Journal of Economic Perspectives, American Economic Association, vol. 12(4), pages 31-50, Fall.
  15. 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 823-839, December.
  16. Chen, Yongmin & Ishikawa, Jota & Yu, Zhihao, 2004. "Trade liberalization and strategic outsourcing," Journal of International Economics, Elsevier, vol. 63(2), pages 419-436, July.
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  18. repec:pri:wwseco:dp218 is not listed on IDEAS
  19. George J. Stigler, 1951. "The Division of Labor is Limited by the Extent of the Market," Journal of Political Economy, University of Chicago Press, vol. 59, pages 185-185.
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