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Globalization and economic development

Author

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  • Sven W. Arndt

    (Lowe Institute of Political Economy, Claremont McKenna College)

Abstract

A feature of the continuing integration of the world economy is the globalization of production and the consequent rise of trade in parts and components. Products are more internationalized and less identified with any particular country. Non-trivial shares of the value-added of many exports consist of imports and vice versa. Extension of the international division of labour beyond finished products offers developing countries a broader range of choices for industrialization. This paper explores the implications of these developments in the context of a standard trade model. Component specialization in a developing country's import sector is shown to be superior in overall welfare terms to specialization in the integrated product. Output and employment are higher in the sector, but the wage-rental ratio is lower.

Suggested Citation

  • Sven W. Arndt, 1999. "Globalization and economic development," Working Papers 9902, Lowe Institute of Political Economy.
    • Handle: RePEc:loi:wpaper:9902
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    More about this item

    Keywords

    Trade; division of labour; intermediate products; fragmentation; intra-product specialization;
    All these keywords.

    JEL classification:

    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade
    • D5 - Microeconomics - - General Equilibrium and Disequilibrium

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