Trade Integration, Global Value Chains, and Capital Accumulation

Michael Sposi, Kei-Mu Yi and Jing Zhang
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Michael Sposi: https://people.smu.edu/msposi/

No WP-2020-26, Working Paper Series from Federal Reserve Bank of Chicago

Abstract: Motivated by increasing trade and fragmentation of production across countries since World War II, we build a dynamic two-country model featuring sequential, multi-stage production and capital accumulation. As trade costs decline over time, global-value-chain (GVC) trade expands across countries, particularly more in the faster growing country, consistent with the empirical pattern. The presence of GVC trade boosts capital accumulation and economic growth and magnifies dynamic gains from trade. At the same time, endogenous capital accumulation shapes comparative advantage across countries, impacting the dynamics of GVC trade: a country becoming more capital abundant concentrates more on the capital-intensive stage of the production.

Keywords: Multistage production; International trade; Capital accumulation (search for similar items in EconPapers)
JEL-codes: E22 F10 F43 (search for similar items in EconPapers)
Pages: 42
Date: 2020-11-13, Revised 2020-05-24
New Economics Papers: this item is included in nep-dge, nep-gro, nep-int and nep-mac
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Citations: View citations in EconPapers (3)

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Related works:
Journal Article: Trade Integration, Global Value Chains, and Capital Accumulation (2021)
Working Paper: Trade Integration, Global Value Chains and Capital Accumulation (2020)
Working Paper: Trade Integration, Global Value Chains, and Capital Accumulation (2020)
Working Paper: Trade Integration, Global Value Chains, and Capital Accumulation (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedhwp:92682

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DOI: 10.21033/wp-2020-26

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