The nature and growth of vertical specialization in world trade

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Abstract

Dramatic changes are occurring in the nature of international trade. Production processes increasingly involve a sequential, vertical trading chain stretching across many countries, with each country specializing in particular stages of a good's production sequence. We document a key aspect of these vertical linkages - the use of imported inputs in producing goods that are exported - which we call vertical specialization. Using input-output tables from 10 OECD and four emerging market countries we calculate that vertical specialization accounts for 21% of these countries' exports, and grew almost 30% between 1970 and 1990. We also find that growth in vertical specialization accounts for 30% of the growth in these countries' exports. © 2001 Elsevier Science B.V. All rights reserved.

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Hummels, D., Ishii, J., & Yi, K. M. (2001). The nature and growth of vertical specialization in world trade. Journal of International Economics, 54(1), 75–96. https://doi.org/10.1016/S0022-1996(00)00093-3

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