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SUPER‐SPECIALIZATION AND THE GAINS FROM TRADE
Author(s) -
ARNDT SVEN W.
Publication year - 1998
Publication title -
contemporary economic policy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.454
H-Index - 49
eISSN - 1465-7287
pISSN - 1074-3529
DOI - 10.1111/j.1465-7287.1998.tb00535.x
Subject(s) - economics , international economics , econometrics , international trade
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.