IT, Production Specialization, and Division of Labor: A Smith-Ricardo Model of International Trade

Zhihao Yu ()

No 03-06, Carleton Economic Papers from Carleton University, Department of Economics

Abstract: A simple Smith-Ricardo model is developed that incorporates division of labor into the continuum-good Ricardian model of Dornbusch et al.(1977). The trade off between the efficiency gain and coordination cost associated with production specialization de-termines the efficient level of division of labor. The model is applied to explain how the recent IT revolution could affect a country’s efficient level of production specialization and competitive advantage. In particular, absolute advantage (in division of labor) and relative labor supply plays a crucial role in determining the effects of an IT progress on a country’s competitive margin in international trade.

Keywords: Division of labor; Production specialization; Information technology; Coordination cost; International Trade (search for similar items in EconPapers)
JEL-codes: F10 F11 (search for similar items in EconPapers)
Pages: 20 pages
Date: 2003-06-25
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Published: Carleton Economic Papers

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