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Super-Specialization and the Gains from Trade

Author

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  • Sven W. Arndt

    (Lowe Institute of Political Economy, Claremont McKenna College)

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.

Suggested Citation

  • Sven W. Arndt, 1998. "Super-Specialization and the Gains from Trade," Working Papers 9801, Lowe Institute of Political Economy.
    • Handle: RePEc:loi:wpaper:9801
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    File URL: http://lowe.claremontmckenna.edu/pdf/WP98-01.pdf
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    More about this item

    Keywords

    fragmentation; cross-border production networks;

    JEL classification:

    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

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