Patterns of vertical specialisation in trade: long-run evidence for 91 countries

Stefan Pahl, Marcel P. Timmer
2019
DOI number
http://dx.doi.org/10.1007/s10290-019-00352-3
#Trade and FDI
#Manufacturing

The authors estimate the domestic value-added content in exports of manufacturing goods (VAX-D ratio) for 91 countries over the period from 1970 to 2013. They find a strong decline in the world VAX-D ratio since the mid-1980s mostly accounted for by the substitution of foreign for domestic intermediates. Using a breakpoint detection method, they identify three waves of vertical specialisation in the world economy: 1970–1979, 1986–1995 and 1996–2008. The authors find that most countries (79) initiated a period of vertical specialisation at least once. They find strong evidence that the VAX-D ratio correlates negatively with GDP per capita, and that the negative slope is flattening out at higher levels of income.

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