Super-Specialization and the Gains from Trade

Sven Arndt (lowe@claremontmckenna.edu)
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Sven Arndt: Lowe Institute of Political Economy, Claremont McKenna College

No 9801, Working Papers from Lowe Institute of Political Economy

Abstract: An important facet of "globalization" is the spread of cross-border production, which is variously known as intra-product specialization, super-specialization, or production fragmentation. This advanced stage in the international division of labor works particularly well between high-wage developed and low-wage emerging economies. But it is precisely this context in which the practice has been criticized for destroying jobs and undermining wages. This paper examines the welfare implications of this type of specialization on the part of labor-intensive, import-competing industries in advanced countries. The results will surprise the skeptics, for when import-competing industries abandon production of labor-intensive components, wages rise and industry employment and output expand. National welfare increases, For a large country, the terms of trade improve, raising national welfare still further.

Keywords: fragmentation; cross-border production networks (search for similar items in EconPapers)
JEL-codes: F11 F23 (search for similar items in EconPapers)
Pages: 6 pages
Date: 1998
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Published in Contemporary Economic Policy, v.16 October 1998 pages 480-485.

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Persistent link: https://EconPapers.repec.org/RePEc:loi:wpaper:9801

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