Vertical specialization and the changing nature of world trade
Abstract: A major feature of globalization has been the enormous increase in international flows of goods and services: countries are now trading much more with each other. In this article, the authors demonstrate the greater role vertical specialization is playing in these increased flows. Vertical specialization occurs when a country uses imported intermediate parts to create a good it later exports--that is, the country links sequentially with other countries to produce a final good. Deriving evidence from four case studies as well as OECD input-output tables, the authors reveal that vertical specialization has accounted for a large and increasing share of international trade over the last several decades. They also note that because the trends encouraging vertical specialization--lower trade barriers and improvements in transportation and communications technologies--are likely to continue, this type of international trade should become even more prevalent in the next century.
Keywords: International trade;
File(s): File format is text/html https://www.newyorkfed.org/medialibrary/media/research/epr/98v04n2/9806humm.html
File(s): File format is application/pdf https://www.newyorkfed.org/medialibrary/media/research/epr/98v04n2/9806humm.pdf
Provider: Federal Reserve Bank of New York
Part of Series: Economic Policy Review