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Super‐Specialization And The Gains From Trade

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  • SVEN W. ARNDT

Abstract

An important facet of “globalization” is the spread of cross‐border production, which is variously known as intro 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.

Suggested Citation

  • Sven W. Arndt, 1998. "Super‐Specialization And The Gains From Trade," Contemporary Economic Policy, Western Economic Association International, vol. 16(4), pages 480-485, October.
    • Handle: RePEc:bla:coecpo:v:16:y:1998:i:4:p:480-485
    DOI: 10.1111/j.1465-7287.1998.tb00535.x
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    1. Arndt, Sven W., 1997. "Globalization and the open economy," The North American Journal of Economics and Finance, Elsevier, vol. 8(1), pages 71-79.
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