Vertical specialization and the changing nature of world trade

David Hummels, Dana Rapoport and Kei-Mu Yi

Economic Policy Review, 1998, vol. 4, issue Jun, 79-99

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 (search for similar items in EconPapers)
Date: 1998
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Citations: View citations in EconPapers (241)

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