Amador, João and Cabral, Sónia (2008): Vertical specialization across the world: a relative measure. Published in: Banco de Portugal Working Papers No. 10-2008 (18. July 2008): pp. 1-28.
Download (550kB) | Preview
This paper investigates a specific aspect of international production linkages that, following Hummels et al. (2001), is commonly designated as vertical specialization (VS) - the use of imported inputs to produce goods that are afterwards exported. We propose a relative measure of VS-based trade that combines information from Input-Output matrices and international trade data, producing results for a large sample of individual countries and geographical areas with a detailed product breakdown over the 1967-2005 period. This measure identifies a country’s trade flow as associated with VS activities when the share of exports of a good relatively to the world average is above a given threshold and it is accompanied by a relative share of imports of a related intermediate product that is also above the threshold. The quantification of VS-based trade for each country/product pair in each period is made in a relative and conservative manner, since it includes only the value of intermediate imports that surpasses what is implied by the chosen international threshold. The detailed results can be subsequently added up to get any product or geographical breakdown desired. We illustrate this measure by showing the evolution of VS activities at the world level over the last four decades using a product breakdown by technological intensity and a geographical breakdown by main areas. The results point to a substantial increase of VS in high-technology products over the last two decades. There is also empirical evidence on the sharp increase of VS activities in East Asia.
|Item Type:||MPRA Paper|
|Original Title:||Vertical specialization across the world: a relative measure|
|Keywords:||International Trade; International Fragmentation of Production; Vertical Specialization; Globalization|
|Subjects:||F - International Economics > F1 - Trade > F15 - Economic Integration
F - International Economics > F1 - Trade > F14 - Empirical Studies of Trade
O - Economic Development, Technological Change, and Growth > O5 - Economywide Country Studies > O50 - General
F - International Economics > F1 - Trade
|Depositing User:||S Cabral|
|Date Deposited:||19. Jul 2008 07:51|
|Last Modified:||11. Feb 2013 10:12|
Amador, J. and Cabral, S. (2008), ‘Vertical specialization in Portuguese international trade’, Banco de Portugal Economic Bulletin Summer.
Amador, J., Cabral, S. and Maria, J. R. (2007), Relative export structures and vertical specialization: A simple cross-country index, Working Paper 1-2007, Banco de Portugal.
Arndt, S. W. (1997), ‘Globalization and the open economy’, The North American Journal of Economics and Finance 8(1), 71–79.
Arndt, S. W. and Kierzkowski, H., eds (2001), Fragmentation: New Production Patterns in the World Economy, Oxford University Press, USA.
Athukorala, P.-c. and Yamashita, N. (2006), ‘Production fragmentation and trade integration: East Asia in a global context’, The North American Journal of Economics and Finance 17(3), 233–256.
Balassa, B. (1965), ‘Trade liberalization and “revealed” comparative advantage’, The Manchester School of Economic and Social Studies 33(2), 99–123.
Baldone, S., Sdogati, F. and Tajoli, L. (2001), ‘Patterns and determinants of international fragmentation of production: Evidence from outward processing trade between the EU and Central Eastern European Countries’, Review of World Economics 137(1), 80–104.
Baldone, S., Sdogati, F. and Tajoli, L. (2007), ‘On some effects of international fragmentation of production on comparative advantages, trade flows and the income of countries’, The World Economy 30(11), 1726–1769.
Baldwin, R. (2006), Globalisation: the great unbundling(s), Research paper of the project “Challenges of globalisation for Europe and Finland”, 20 September 2006, Secretariat of the Economic Council of Finland.
Baldwin, R. and Robert-Nicoud, F. (2007), Offshoring: General equilibrium effects on wages, production and trade, NBER Working Papers 12991, National Bureau of Economic Research.
Baumann, U. and di Mauro, F. (2007), Globalisation and euro area trade: Interactions and challenges, Occasional Paper Series 55, European Central Bank.
Borga, M. and Zeile, W. J. (2004), International fragmentation of production and the intrafirm trade of U.S. multinational companies, BEA Working Papers 0013, Bureau of Economic Analysis.
Breda, E., Cappariello, R. and Zizza, R. (2007), Vertical specialization in Europe: Evidence from the import content of exports, Paper presented at the European Trade Study Group 9th Annual Conference, Athens 13-15 September 2007.
Cadarso, M.-A., Gomez, N., Lopez, L.-A. and Tobarra, M.-A. (2007), Vertical specialisation in EU manufacturing and services sectors, Paper presented at the 16th International Conference on Input-Output Techniques, Istanbul 2-6 July 2007.
Campa, J. and Goldberg, L. S. (1997), ‘The evolving external orientation of manufacturing: a profile of four countries’, Federal Reserve Bank of New York Economic Policy Review 3(2), 53–81.
Chen, H., Kondratowicz, M. and Yi, K.-M. (2005), ‘Vertical specialization and three facts about U.S. international trade’, North American Journal of Economics and Finance 16(1), 35–59.
Chen, H.-Y. and Chang, Y.-M. (2006), ‘Trade verticality and structural change in industries: The cases of Taiwan and South Korea’, Open Economies Review 17(3), 321–340.
Clark, D. (2006), ‘Country and industry-level determinants of vertical specialization-based trade’, International Economic Journal 20(2), 211–225.
De Saint-Vaulry, A. (2008), Base de données CHELEM-commerce international du CEPII, Working Papers 2008-09, CEPII Research Center.
Dean, J. M., Fung, K. and Wang, Z. (2007), Measuring the vertical specialization in Chinese trade, Office of Economics Working Paper 2007-01-A, U.S. International Trade Commission.
Deardorff, A. V. (2001a), Fragmentation across cones, in S. W. Arndt and H. Kierzkowski, eds, ‘Fragmentation: New Production Patterns in the World Economy’, Oxford University Press, USA, chapter 3, pp. 35–51.
Deardorff, A. V. (2001b), ‘Fragmentation in simple trade models’, The North American Journal of Economics and Finance 12(2), 121–137.
Deardorff, A. V. (2005), ‘A trade theorist’s take on skilled-labor outsourcing’, International Review of Economics and Finance 14(3), 259–271.
Egger, H. and Egger, P. (2001), ‘Cross-border sourcing and outward processing in EU manufacturing’, The North American Journal of Economics and Finance 12(3), 243–256.
Egger, H. and Egger, P. (2003), ‘Outsourcing and skill-specific employment in a small economy: Austria after the fall of the Iron Curtain’, Oxford Economic Papers 55(4), 625–643.
Egger, H. and Egger, P. (2005), ‘The determinants of EU processing trade’, The World Economy 28(2), 147–168.
Egger, P., Pfaffermayr, M. and Wolfmayr-Schnitzer, Y. (2001), ‘The international fragmentation of Austrian manufacturing: The effects of outsourcing on productivity and wages’, The North American Journal of Economics and Finance 12(3), 257–272.
Feenstra, R. C. (2007), Globalization and its impact on labour, WIIW Working Papers 44, The Vienna Institute for International Economic Studies.
Feenstra, R. C. and Hanson, G. H. (1996), ‘Globalization, outsourcing, and wage inequality’, American Economic Review 86(2), 240–45.
Feenstra, R. C., Hanson, G. H. and Swenson, D. L. (1998), Offshore assembly from the United States: Production characteristics of the 9802 program, Working Paper 98-10, University of California, Davis - Department of Economics.
Gaulier, G., Lemoine, F. and Unal Kesenci, D. (2005), China’s integration in East Asia: Production sharing, FDI and high-tech trade, Working Papers 2005-09, CEPII Research Center.
Gaulier, G., Lemoine, F. and Unal Kesenci, D. (2006), China’s emergence and the reorganization of trade flows in Asia, Working Papers 2006-05, CEPII Research Center.
Gaulier, G., Martin, J., Méjean, I. and Zignago, S. (2008), International trade price indices, Working Papers 2008-10, CEPII Research Center.
Geishecker, I. (2006), ‘Does outsourcing to Central and Eastern Europe really threaten manual workers’ jobs in Germany?’, The World Economy 29(5), 559–583.
Geishecker, I., Gorg, H. and Munch, J. R. (2008), Do labour market institutions matter? Micro-level wage effects of international outsourcing in three European countries, Kiel Working Papers 1404, Kiel Institute for the World Economy.
Gorg, H. (2000), ‘Fragmentation and trade: US inward processing trade in the EU’, Weltwirtschaftliches Archiv 127(3), 403–422.
Grossman, G. M. and Rossi-Hansberg, E. (2006a), The rise of offshoring: it’s not wine for cloth anymore, in ‘The New Economic Geography: Effects and Policy Implications’, Vol. Jackson Hole Conference, Federal Reserve Bank of Kansas City, pp. 59–102.
Grossman, G. M. and Rossi-Hansberg, E. (2006b), Trading tasks: A simple theory of offshoring, NBER Working Papers 12721, National Bureau of Economic Research.
Hanson, G. H., Mataloni, R. J. and Slaughter, M. J. (2005), ‘Vertical production networks in multinational firms’, The Review of Economics and Statistics 87(4), 664–678.
Helg, R. and Tajoli, L. (2005), ‘Patterns of international fragmentation of production and the relative demand for labor’, The North American Journal of Economics and Finance 16(2), 233–254.
Hijzen, A. (2005), ‘A bird’s eye view of international outsourcing: data, measurement and labour demand effects’, ´ Economie internationale 104(4), 45–63.
Horgos, D. (2007), Labor market effects of international outsourcing: How measurement matters, SOEP papers 58, DIW Berlin, The German Socio-Economic Panel.
Hummels, D., Ishii, J. and Yi, K.-M. (2001), ‘The nature and growth of vertical specialization in world trade’, Journal of International Economics 54(1), 75–96.
Hummels, D., Rapoport, D. and Yi, K.-M. (1998), ‘Vertical specialization and the changing nature of world trade’, Federal Reserve Bank of New York Economic Policy Review 4(2), 79–99.
Jones, R. W. and Kierzkowski, H. (1990), The role of services in production and international trade: A theoretical framework, in R. W. Jones and A. Krueger, eds, ‘The Political Economy of International Trade’, Oxford, Basil Blackwell, chapter 3, pp. 31–48.
Jones, R. W. and Kierzkowski, H. (2001), A framework for fragmentation, in S. W. Arndt and H. Kierzkowski, eds, ‘Fragmentation: New Production Patterns in the World Economy’, Oxford University Press, USA, chapter 2, pp. 17–34.
Jones, R.W. and Kierzkowski, H. (2005), ‘International fragmentation and the new economic geography’, The North American Journal of Economics and Finance 16(1), 1–10.
Jones, R. W., Kierzkowski, H. and Lurong, C. (2005), ‘What does the evidence tell us about fragmentation and outsourcing?’, International Review of Economics and Finance 14(3), 305–316.
Kaminski, B. and Ng, F. (2001), Trade and production fragmentation: Central European economies in European Union networks of production and marketing, Policy Research Working Paper Series 2611, The World Bank.
Kimura, F. (2006), ‘International production and distribution networks in East Asia: Eighteen facts, mechanics, and policy implications’, Asian Economic Policy Review 1(2), 326–344.
Kimura, F. and Ando, M. (2005), ‘Two-dimensional fragmentation in East Asia: Conceptual framework and empirics’, International Review of Economics & Finance 14(3), 317–348.
Kimura, F., Takahashi, Y. and Hayakawa, K. (2007), ‘Fragmentation and parts and components trade: Comparison between East Asia and Europe’, The North American Journal of Economics and Finance 18(1), 23–40.
Lall, S., Albaladejo, M. and Zhang, J. (2004), ‘Mapping fragmentation: Electronics and automobiles in East Asia and Latin America’, Oxford Development Studies 32(3), 407–432.
Lawson, A. M., Bersani, K. S., Fahim-Nader, M. and Guo, J. (2002), ‘Benchmark Input-Output Accounts of the United States, 1997’, Bureau of Economic Analysis Survey of Current Business 82, 19–109.
Lemoine, F. and Unal Kesenci, D. (2002), China in the international segmentation of production processes, Working Papers 2002-02, CEPII Research Center.
Lemoine, F. and Unal Kesenci, D. (2004), ‘Assembly trade and technology transfer: The case of China’, World Development 32(5), 829–850.
Minondo, A. U.-E. and Rubert, G. A. (2002), ‘La especialización vertical en el comercio internacional de España’, Información Comercial Española, ICE: Revista de economía (802), 117–128.
Molnar, M., Pain, N. and Taglioni, D. (2007), The internationalisation of production, international outsourcing and employment in the OECD, OECD Economics Department Working Papers 561, OECD.
Ng, F. and Yeats, A. J. (1999), Production sharing in East Asia: Who does what for whom, and why?, Policy Research Working Paper Series 2197, The World Bank.
OECD (2005), OECD Science, Technology and Industry Scoreboard 2005, OECD.
Sanyal, K. K. and Jones, R. W. (1982), ‘The theory of trade in middle products’, American Economic Review 72(1), 16–31.
Strauss-Kahn, V. (2003), The role of globalization in the within-industry shift away from unskilled workers in France, NBER Working Papers 9716, National Bureau of Economic Research.
Swenson, D. L. (2005), ‘Overseas assembly and country sourcing choices’, Journal of International Economics 66(1), 107–130.
Venables, A. J. (1999), ‘Fragmentation and multinational production’, European Economic Review 43(4-6), 935–945.
Xiaodi, Z. and Jingwei, S. (2007), ‘An analysis of China’s global industrial competitive strength based on vertical specialization’, Frontiers of Economics in China 2(1), 57–73.
Yeats, A. J. (1998), Just how big is global production sharing?, Policy Research Working Paper Series 1871, The World Bank.
Yi, K.-M. (2003), ‘Can vertical specialization explain the growth of world trade?’, Journal of Political Economy 111(1), 52–102.