IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this paper

On some effects of international fragmentation of production on comparative advantages, trade flows, and the income of countries

Listed author(s):
  • Salvatore Baldone

    (Polytechnic University of Milano, Italy.)

  • Fabio Sdogati

    (Polytechnic University of Milano, Italy.)

  • Lucia Tajoli

    (Polytechnic University of Milano and Cespri Bocconi University, Milano, Italy.)

In traditional trade models, whether based on technological differences or on relative factor endowments, merchandise composition and directions of trade are derived from closed-economy, pre-trade conditions. But nowadays one the basic assumptions of traditional trade models, i.e. that production processes are integrated within just one country, is being increasingly violated as previously integrated productive activities are segmented and spread over an international network of production sites: as a result, an increasingly large share of trade flows is made up of intermediate and unfinished goods being transferred from one country to another in order to be processed. In this paper we submit that such new configuration of production processes has important effects on at least three dimensions of economic research. First, we show that international disintegration of production processes leads to a lessening of the power of comparative advantages when it comes to explaining both merchandise composition and directions of trade, while it is the concept of absolute advantage to become increasingly relevant; second, we show that empirical measures of revealed comparative advantages are inherently misleading if they do not account for differences in the stageof-processing of traded goods; third, we estimate a simple model of aggregate demand accounting for international trade in intermediates: results of estimation lend support to our prior that participation of a country in the process of international fragmentation of production plays a specific and significant role in determining its year-over-year change in GDP.

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:
Download Restriction: no

Paper provided by KITeS, Centre for Knowledge, Internationalization and Technology Studies, Universita' Bocconi, Milano, Italy in its series KITeS Working Papers with number 187.

in new window

Length: pages 34
Date of creation: Nov 2006
Date of revision: Nov 2006
Handle: RePEc:cri:cespri:wp187
Contact details of provider: Postal:
via Sarfatti, 25 - 20136 Milano - Italy

Phone: +39.025836.3397
Fax: +39.025836.3399
Web page:

Order Information: Postal: E G E A - via R. Sarfatti, 25 - 20136 Milano -Italy

No references listed on IDEAS
You can help add them by filling out this form.

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:cri:cespri:wp187. 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: (Valerio Sterzi)

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.