Title:

The Growth of World Trade, Research Paper 9718

PREVIOUS | NEXT

The Growth of World Trade, Research Paper 9718

DATE: May 1997

PART OF: AUTHORS:

ABSTRACT: The growth in the trade share of output is one of the most important features of the world economy since World War II. We show that an important propagation mechanism for this growth is vertical specialization. Simply put, vertical specialization occurs when imported inputs are used to produce goods that are then exported. We show that many of the standard trade models—the Ricardian model, the monopolistic competition model, and the international real business cycle models—cannot explain the growth in trade unless very high elasticities of demand and substitution are assumed. We then use case studies and other empirical evidence to demonstrate the quantitative significance of vertical specialization in trade. Finally, we develop a model of vertical specialization that can explain the growth in trade under reasonable elasticities, which suggests that vertical specialization has important implications for the gains from trade.

Download (pdf) View Full Text

Share this page:


Diversity is critical to the Federal Reserve, and we are firmly committed to fostering a diverse and inclusive culture throughout the Federal Reserve System. Collections within FRASER contain historical language, content, and descriptions that reflect the time period within which they were created and the views of their creators. Certain collections contain objectionable content—for example, discriminatory or biased language used to refer to racial, ethnic, and cultural groups. These viewpoints and attitudes are inconsistent with our values, but the original descriptions are retained to ensure that they are not erased from the historical record.
Save & Share
less

Yi, Kei-Mu, 1962- and Ishii, Jun. "The Growth of World Trade, Research Paper 9718," Research Papers (Federal Reserve Bank of New York) (May 1997). https://fraser.stlouisfed.org/title/6570/item/615570, accessed on March 31, 2023.

More Information
less

SUBJECTS:

THEMES: CLASSIFICATION:
  • lcc: HG136 .R45 no.9718
IDENTIFIERS:
  • oclc: 37299276
  • repec: fip:fednrp:9718
Metadata (XML)
Metadata (JSON)