 Vertical specialisation and gains from tradeThe World Economy, 2021, vol. 44, issue 4, 1110-1140 Abstract: Multi‐stage production is a significant source of gains from trade in many recent quantitative trade models. Meanwhile, specialisation across stages of production, or ‘vertical specialisation’, has been largely ignored in these models. In this paper, I provide evidence that vertical specialisation is a salient feature in the international trade data, which suggests that standard models are inaccurate. I develop a model with multi‐stage production where country‐level productivity differences provide a basis for vertical specialisation and potentially new gains from trade. I then quantify the gains from vertical specialisation according to the model using data. Despite the evidence of vertical specialisation in the data, I find that the average gains from trade due to this channel are modest at less than 1% of GDP. These results suggest that, if vertical specialisation is an important source of gains from trade, then revealing these gains may require either more complex models, or more granular data, than are typically used in workhorse quantitative trade models. Date: 2021 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:bla:worlde:v:44:y:2021:i:4:p:1110-1140 Ordering information: This journal article can be ordered from Access Statistics for this article The World Economy is currently edited by David Greenaway More articles in The World Economy from Wiley Blackwell |
Is your work missing from RePEc? Here is how to contribute.
Questions or problems? Check the EconPapers FAQ or send mail to .
EconPapers is hosted by the
School of Business at Örebro University.