Trade elasticity and vertical specialisation

Ines Buono and Filippo Vergara Caffarelli

No 924, Temi di discussione (Economic working papers) from Bank of Italy, Economic Research and International Relations Area

Abstract: This paper shows that vertical specialisation can increase the elasticity of trade to income, hence explaining dramatic events such as the great trade collapse. We argue that a change in the extent of vertical specialisation affects the elasticity of trade to income, while a mere change in global production levels for a given extent of vertical specialisation does not. In the model we show that only large demand shocks induce firms to vary the extent of vertical specialisation. Using panel data starting from the late 1990s that include the 2008-09 global crisis, we consistently find that the correlation between trade elasticity and vertical specialisation increases precisely in years of large demand shocks, such as the ICT euphoria and the great trade collapse.

Keywords: vertical specialisation; trade elasticity; global crisis; trade collapse (search for similar items in EconPapers)
JEL-codes: F10 F12 L23 (search for similar items in EconPapers)
Date: 2013-07
New Economics Papers: this item is included in nep-int
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
http://www.bancaditalia.it/pubblicazioni/temi-disc ... 0924/en_tema_924.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bdi:wptemi:td_924_13

Access Statistics for this paper

More papers in Temi di discussione (Economic working papers) from Bank of Italy, Economic Research and International Relations Area Contact information at EDIRC.
Bibliographic data for series maintained by ().