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Trade Integration, Global Value Chains, and Capital Accumulation

Michael Sposi (), Kei-Mu Yi and Jing Zhang ()

No 28087, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Motivated by increasing trade and fragmentation of production across countries, accompanied by income convergence by many emerging economies, we build a dynamic two-country model featuring sequential, multi-stage production and capital accumulation. As trade costs decline over time, global-value-chain (GVC) trade expands across countries, particularly more in the faster growing country, consistent with the empirical pattern. Via Heckscher-Ohlin forces, GVC trade can generate back-and-forth feedback between comparative advantage and capital accumulation (growth). Moreover, GVC trade increases both steady-state and dynamic gains from trade.

JEL-codes: E22 F10 F43 O4 (search for similar items in EconPapers)
Date: 2020-11
New Economics Papers: this item is included in nep-dge, nep-gro, nep-int and nep-mac
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Published as Michael Sposi & Kei-Mu Yi & Jing Zhang, 2021. "Trade Integration, Global Value Chains, and Capital Accumulation," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 69(3), pages 505-539, September.

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Journal Article: Trade Integration, Global Value Chains, and Capital Accumulation (2021) Downloads
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Working Paper: Trade Integration, Global Value Chains, and Capital Accumulation (2020) Downloads
Working Paper: Trade Integration, Global Value Chains, and Capital Accumulation (2020) Downloads
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