Vertical Specialization Research Articles

İmalat Sanayinde Dikey Uzmanlaşma: Orta ve Doğu Avrupa Ülkelerine Yönelik Bulgular

Since 1980 with the accelerating trends of globalization, the international fragmentation of production was one of the drastic transformations that occurred in the world economy. It is defined as the process whereby more than one country participates in previously integrated production activities (vertical specialization) involved in producing a final good. After the dissolution of the Soviet Union, the post-socialist Central and Eastern European countries (CEECs) boost their participation in global production networks. The main motivation of this paper is analyzing the extent to which the CEECs that joined the EU in 2004 (Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Slovakia, Slovenia) are involved in the global production process. Based on the World Input-Output Database (WIOD); HIY method proposed by Hummels, Ishii & Yi (2001) is applied to the national input-output tables (NIOTs) of CEECs to estimate the manufacturing industries’ vertical specialization rate during 2000-2014. The results revealed that the CEECs’ vertical specialization rate increased during 2000-2014 but decreased during the 2008-2009 global financial crisis. The highest rate was respectively accounted for Hungary, Slovakia, Estonia, Slovenia, Lithuania, Poland and Latvia. The countries with the highest manufacturing industry’s vertical specialization were Hungary, Estonia, Slovakia, Latvia, Czech Republic, Slovenia, Poland and Lithuania, respectively. The manufacturing industries’ vertical specialization rate in Estonia, Hungary, Latvia and Poland was higher than that of the entire economy. Finally, in the Czech Republic, Latvia, Lithuania and Poland; higher rates were accounted for the medium-low technology sectors, but for medium-high and high-tech sectors in Estonia, Hungary, Slovakia and Slovenia.

Fiscal Decentralization, Export Technology Complexity and Regional Green Total Factor Productivity: Empirical Study based on GML Productivity Index

With the Global-Malmquist-Luenberger (GML) productivity index, we calculate and evaluate the Chinese green total factor productivity and the decomposition, and further take the dynamic GMM method to empirically study the effect of export sophistication, fiscal decentralization and their interaction terms on regional green total factor productivity. The increasing export technology complexity has a significant effect on the regional green total factor productivity growth. Increasing export sophistication degree means the improving status of international vertical specialization division and upgrading of export product structure, which has a positive incentive effect on adoption of regional environmental technology and transformation and upgrading of regional industrial structure. However, this effect will be disturbed by the regional fiscal decentralization. Fiscal decentralization intensifies local government’s competition and distorts local factor market and resources misallocation. It will not only distort the incentive of enterprises to increase less technology and the R&D on the export of products, but also will inhibit the upgrading process of regional industrial structure, which would lead to extensive growth trap of “high consumption and high emission”. To continue to enhance China's position in the international division of labor is necessary. Moreover, a diversified evaluation system is encouraged in the performance evaluation system of local officials to optimize the resources allocation efficiency, and propose a proper guidance and incentive for local enterprises to promote industrial transformation and upgrading. Ultimately a win-win situation between ecological civilization construction and economic sustainable growth is achieved.

Global value chains and exchange rate pass-through—The role of non-linearities

This paper examines the role of global value chains development in reducing the exchange rate pass-through (ERPT) to import and producer prices. In contrast to the existing research, we assume that the decline in ERPT resulting from the enhanced participation in GVC may be non-linear with respect to country’s position in the global value chain due to different firms’ market power at various stages of vertical specialization. We investigate a panel of 43 advanced and emerging market economies using a panel smooth transition regression model and WIOD data. We find that growing backward GVC participation of the suppliers of imported intermediate input results in a reduction of the ERPT to producer prices in the importing country. Moreover this effect is non-linear. The ERPT for countries whose suppliers are strongly involved in the production along the global value chains is significantly (four times) smaller than for economies with suppliers not participating in GVC. We also document that the decline in aggregate ERPT in recent years resulted mainly from changes occurring in ERPT for the EU member states due to increased backward GVC participation of their major trading partners, while the ERPT for other countries has in fact remained roughly unchanged throughout the analyzed period.

Does Aid for Trade Promote Vertical Specialization?

We study the impact of Aid for Trade (AfT) and analyze whether aid recipients participate in bilateral vertical specialization. Using data from 15 donors and 106 recipients for the years 2002 to 2018, we investigate whether bilateral AfT increases bilateral vertical specialization. To focus on the variation between donors and recipients over time, we absorb other sources of variation through donor–year, recipient–year and donor–recipient fixed effects. Our findings show that AfT helps expand bilateral vertical specialization for a particular group of countries, upper middle‐income countries. Subsequent analysis reveals that AfT improves the infrastructure of upper middle‐income countries, which promotes participation in vertical specialization. Our findings suggest that to promote vertical specialization in lower income countries, AfT should be provided more directly to improve their infrastructure.

Measuring the Intermediate Goods’ External Dependency on the Global Value Chain: A Case Study of China

In the face of the anti-globalization trend and the shrinking of the global value chain, ensuring the safety of the global layout of the industrial chain and the sustainability of each country’s internal intermediate product production cycle has become an important new development strategy for all countries. The sustainability of the internal and external cycles of production systems is closely related to global value chains. Based on the world input-output model, we define the trade pattern of intermediate goods in various countries from the perspective of trade intermediary attributes, and propose two indicators by which to measure the dependence of China on the global value chain in the process of “dual circulation” development: the degree of vertical specialization (VSD) and the import share of domestic total consumption (IMS); China’s super-large market leads to low values of both VSD and IMS. China’s high-tech industry has the highest degree of external dependence in the process of participating in dual circulation, and there has been a fluctuation cycle since 2009. The external dependence of different industries shows heterogeneity.

Impact of global value chains on total factor productivity: The case of Indian manufacturing

AbstractWith production increasingly fragmented across borders, global value chains (GVCs) form a key feature of the world economy. A rising body of literature has documented productivity gains from linking into GVCs for developed‐country firms, but studies on the same for developing countries are scant. In this paper, we empirically examine whether GVCs can increase total factor productivity (TFP) in developing countries, using an unbalanced panel of Indian manufacturing firms in the period 2000/2001–2014/2015 from the Prowess data set. To address econometric issues of self‐selection and endogeneity, we use a two‐stage empirical strategy of propensity score matching and system generalized method of moments. The results indicate that linking into GVCs has a positive and significant impact on firm TFP, even after accounting for self‐selection of more productive firms into GVCs. Once linked, increasing GVC embeddedness, captured through firm‐level vertical specialization, also has a positive and significant impact on firm productivity. But productivity gains are not homogenous; GVC firms that link into relational governance chains, captured through the share of skilled workers and infrastructure and communication index relative to industry, have 20% higher productivity growth than firms in other chains. Older and more liquid GVC firms are also more productive. Designing policies to facilitate GVC linkages and firm technological capabilities can thus foster productivity gains in developing countries.

Does International Fragmentation of Production and Global Value Chains Participation Affect the Long-run Economic Growth?

This article aims to investigate whether the international fragmentation of production and the global value chains (hereafter GVCs) participation affects the economic growth for a set of 40 advanced and emerging economies. It considers four aspects related to the type of participation and position in GVCs captured by different value-added measures: (a) vertical specialisation index; (b) GVC participation index; (c) GVC position index in low-tech sectors; and (d) GVC position index in high-tech sectors. A panel autoregressive distributed lag (PARDL) model is pioneeringly employed to capture the long-term relationship between economic growth and our four measures for annual value-added data from 1995 to 2011, provided by the World Input–Output Tables (WIOT). The main long-run results indicate that (a) higher levels of international fragmentation of production and GVCs’ participation ensure higher GDP per capita growth rates; (b) the fragmentation and GVCs’ participation are more important to GDP growth than the gross exports as a percentage of GDP; (c) GVCs’ participation index, which considers both the ‘forward’ and ‘backward’ participation, is less important than the vertical specialisation, measured by the foreign intermediate imports; and (d the countries engaged in upstream positions in low-technology GVCs were positively and significantly benefitted in terms of growth. JEL Codes: F14, F43

Impact of the COVID-19 pandemic on global value chain and implications for the Belt and Road Initiative

China's Belt and Road Initiative (BRI) has the merit of contributing to regional economic development in tandem with infrastructure investment along economic and transport corridors. However, the issue of its sustainability has been raised due to enormous capital requirements and low profitability. Moreover, the outbreak of the COVID-19 has caused incomparable economic damage and supply chain disruptions worldwide in the form of entry bans, quarantines, trade blockades, and global protectionism, which are barriers to international trade and work against the development of the global value chain (GVC). This paper aims to quantitatively estimate the impact of COVID-19 on GVC adjustment by region and industry and derives policy implications based on the decomposition of value added (VA) and vertical specialisation (VS) trade. It is estimated that the GVC will shrink by 4.8%-20.2% in terms of VS trade depending on various scenarios.

Inside the White Box: Unpacking the Determinants of Quality and Vertical Specialization

This paper explores patterns of quality differentiation and specialization relying on model-level panel data of retail sales and prices of refrigerators across 23 countries in the European Union. Unlike customs data aggregated at the product category, typically used in the literature, model-level data allow us to test for the presence of nonhomotheticities by comparing market shares of identical models across different markets. We measure quality at the model level, account for varying willingness-to-pay for quality at different levels of income, and link quality measures to objective model attributes. Using originally assembled data on the country of manufacture of each model, we study patterns of quality specialization by brands with plants in multiple countries. We find that firms locate the production of their higher-quality models in richer countries, and argue that such patterns of quality specialization are driven mainly by a home-market effect linked to nonhomothetic preferences.

The usefulness of extended input\u2013output tables incorporating firm heterogeneity

This study examines the usefulness of an extended input–output table (EIOT) incorporating the heterogeneity of Japanese firms based on differences in ratios of imported intermediate goods to total output. Using an EIOT, the vertical specialization indicator of Japan was calculated, which corresponds to the foreign value added included in exports. In this process, differences in intermediate input ratios were measured examining different types of firms using firm-level microdata from the Basic Survey of Japanese Business Structure and Activities. The results indicate that distinguishing between exporting and non-exporting firms is relevant for assembly industries such as electronics and automobiles, as widely discussed in the literature. In contrast, for primary materials industries, such as paper, chemical, and metal industries, other distinctions appear to be more relevant. For example, for the chemical industry, wherein firms tend to have large, integrated manufacturing plants, the differences in intermediate import ratios are largest when distinguishing large firms from small and medium firms. For paper and metal industries, which rely on foreign raw materials, the difference is largest when distinguishing between firms with and without foreign affiliates. By incorporating such heterogeneity, the vertical specification indicator increases by 70%; thus, the EIOT captures the foreign value added more comprehensively.

Vertical integration vs. specialization: a nonparametric conditional efficiency estimate for the global semiconductor industry

This paper applies a two-stage nonparametric approach to compare companies operating in different business models in the global semiconductor industry. Using panel data over 1999–2018 on 470 companies in the global semiconductor industry, we explore the operating performance of the semiconductor companies conditional on capital investment and between the integrated device manufacturers and the fabless-foundry business model. We find that vertically integrated device manufacturers are constrained heavily by capital investment. Disentangling the effects of capital investment and business model by a second-stage nonparametric regression, this paper identifies that the vertically specialized fabless-foundry business model helps to improve pure efficiency and mitigate the impact of business-cycle in the global semiconductor industry.

ЕКОНОМІЧНА РЕТРОСПЕКТИВА РОЗВИТКУ ТЕОРІЇ ВЕРТИКАЛЬНОЇ СПЕЦІАЛІЗАЦІЇ

We explore the development of vertical specialization theory which is trade in goods across multiple stages of production on the relationship between trade and business cycle synchronization across countries. We study various papers about international trade model in which explores the degree of vertical specialization varying with trade barriers. We examine how and why these vertical specialization models created by economists and compare differences of those models. Since VS one of the most important changes involves the increasing interconnectedness of production processes in a vertical trading chain that stretches across many countries, with each country specializing in particular stages of a good’s production sequence. The purpose of the article is to form a theoretical and methodological basis for an economic retrospective of the development of the theory of vertical specialization. The subject of the research is theoretical and methodological aspects of the economic retrospective of the development of the theory of vertical specialization. Methods used in the study: historical method, methods of verification of theoretical positions (morphological analysis of the content and relationship of categories, principles and laws, assessment of the correspondence of historical facts to theoretical hypotheses), methods of analysis and synthesis, induction and deduction, logical method (hypothetical and axiomatic approaches), comparison method. Research hypothesis. In the context of global challenges, it is necessary to change the nature of interaction, for which it is necessary to form a theoretical and methodological basis for an economic retrospective of the development of the theory of vertical specialization. Presentation of the main material. Vertical specialization occurs when a country uses imported intermediate parts to produce goods that it later exports. This definition reflects the idea that countries are consistently linked to each other to produce the final good. The fulfillment of the conditions is justified: the product must be produced in several successive stages, two or more countries must specialize in the production of some, but not all, stages, and at least one stage must cross the international border more than once. It is emphasized that vertical specialization occurs when a country uses imported intermediate parts to produce goods that it later exports. Originality and practical significance of the research. The study of the economic retrospective of the development of the theory of vertical specialization includes four interrelated blocks – the theoretical and exploratory basis of interaction, the substantive (paradigmatic and methodological), applied and managerial basis of the interaction of business entities, which will allow comprehensively cover possible aspects of interaction. Conclusions of the study. The article examines the theoretical and methodological basis of vertical trade also connects the growth of international trade with an increase in international production. The forces that have driven increased vertical trade – lowering trade barriers and improving transport and communication technologies – are likely to persist. Thus, we can conclude that the value of VS and vertical trade in world trade will grow from year to year.

Convergence politique et gouvernance des politiques sectorielles au Maroc : une analyse stratégique

This article provides a contribution to the analysis of the governance of multisectoral strategies in Morocco. It aims to identify the factors that can strengthen the convergence of sectoral policies by questioning the action logic of public and private actors and their impact on the coherence of public policies. The aim is to explore the pattern of interactions between the convergence of strategic public policy variables and the governance mechanisms of multisectoral development strategies. Under an interpreativist posture, the research methodology adopted is mainly guided by an inductive reasoning that starts in the case study of the Moroccan Export Plus vision as a multidimensional strategy whose mode of governance is structured under a logic of vertical specialization combining different approaches and involving a multitude of public and private actors. By adopting an actor-based approach, we have opted for the Mactor method as a tool for strategic analysis that allows us to visualize the weight of strategic variables and their impacts on public policy governance. Our investigations have enabled us to understand the role of strategic variables in the governance of sectoral policies in Morocco and to emerge from them the factors likely to strengthen their convergence.

Club Convergence in EU Countries: A Sectoral Perspective

We employ Phillips and Sul’s (2007) nonlinear dynamic factor model to investigate whether economic integration within the EU has caused countries’ productive structures to become increasingly similar and sector-level productivity to converge over the period 1995-2018. This analysis provides several results. First, the EU countries do not converge to a unique path; instead, we observe clustered patterns for aggregate and sector-level productivity growth. Second, although successful integration in global production networks enabled most Central-Eastern European countries to catch up to other EU countries, asymmetries have increased following the recent financial crisis. Third, the heterogeneity in countries’ long-run productivity levels reflects differences in their vertical specialization; countries approaching the high-growth paths specialize in knowledge-intensive production, and the foreign value-added content of their exports is lower. Our analysis is relevant to the ongoing debate on the effects of internationalizing production, as it sheds light on countries’ growth prospects and indicates possible directions for policy actions.

Exchange Rates and Trade Balances: Effects of Intra-Industry Trade and Vertical Specialization

To examine how changes in relative national prices affect trade flows, this study estimates the impact of changes in industry-specific effective real exchange rates on industry-level trade balances, exports, and imports. We analyze the variations in industry-specific intra-industry trade and vertical specialization, which may both govern the long-run relationship between real exchange rates and trade flows. We employ sample information from 13 manufacturing industries across five Asian countries from 2001 to 2015. Rather than country-level aggregate measures, we use disaggregated industry-specific real exchange rates, which provide better measures of relative national prices and may help to uncover different responses that are masked by aggregate data. Fixed-effect estimations reveal that greater price competitiveness, as measured by depreciation in industry-specific effective real exchange rates, increases industry-level trade balances. We find that the elasticity of industry-level trade balances with respect to industry-specific real exchange rates declines as vertical specialization increases. There is also some limited evidence that this elasticity increases as intra-industry trade increases. Taken together, our findings suggest that global supply chains are more important than intra-industry trade in examining the response of trade balances to real exchange rate changes. Importantly, these heterogeneous impacts imply that policies regarding exchange rate management may be of limited potency and will affect different industries in different ways.

Vertical Specialization, International Task Fragmentation, and Convergence

In this paper, we construct an elaborate general equilibrium model with a continuum of production fragments for an intermediate good, then embed it in a growth model to address the effects of global production fragmentation, vertical specialization and trade on growth and inequality for a small developing country. Among other results, we show that a small developing economy grows faster than the rest of the world as a result of global fragmentation and trade in intermediates if it is skilled-labor scarce. We also address the effects of such trade opening on wage inequality.

Inside the White Box: Unpacking the Determinants of Quality and Vertical Specialization

This paper explores patterns of quality differentiation and specialization relying on model-level panel data of retail sales and prices of refrigerators across 23 countries in the European Union. Unlike customs data aggregated at the product category, typically used in the literature, modellevel data allow us to test for the presence of nonhomotheticities by comparing market shares of identical models across different markets. We measure quality at the model level, account for varying willingness-to-pay for quality at different levels of income, and link quality measures to objective model attributes. Using originally assembled data on the country of manufacture of each model, we study patterns of quality specialization by brands with plants in multiple countries. We find that firms locate the production of their higher-quality models in richer countries, and argue that such patterns of quality specialization are driven mainly by a home-market effect linked to nonhomothetic preferences.

Vertical specialisation and gains from trade

AbstractMulti‐stage production is a significant source of gains from trade in many recent quantitative trade models. Meanwhile, specialisation across stages of production, or ‘vertical specialisation’, has been largely ignored in these models. In this paper, I provide evidence that vertical specialisation is a salient feature in the international trade data, which suggests that standard models are inaccurate. I develop a model with multi‐stage production where country‐level productivity differences provide a basis for vertical specialisation and potentially new gains from trade. I then quantify the gains from vertical specialisation according to the model using data. Despite the evidence of vertical specialisation in the data, I find that the average gains from trade due to this channel are modest at less than 1% of GDP. These results suggest that, if vertical specialisation is an important source of gains from trade, then revealing these gains may require either more complex models, or more granular data, than are typically used in workhorse quantitative trade models.

DEVELOPMENT AND USE OF IT SOLUTIONS IN LOGISTICS

Анотація. Безперервний рух до досконалості вимагає постійного контролю і вдосконалення управлінських рішень на підприємстві. Досягти окресленої мети і завдань можливо на основі ІТ-технології для потреб логістики. ІТ-компанії (360data, Alpega, C3 Solutions, CyberLogitec, Data2Logistics та ін.) зосереджують свою увагу на вирішенні як окремих, так і комплексних завдань (планування завантаження, оптимізація, закупівлі, швидкість та ставки, зворотна логістика, маршрутизація і планування, система управління транспортом тощо) логістичних підприємств. Це дає змогу впроваджувати та експлуатувати ІТ-рішення в області ланцюгів поставок, логістики, вертикальної спеціалізації, базової вартості, сторонньої логістики та додаткових рішень. На сьогодні питання підвищення ефективності логістичних процесів вимагають активних дій з боку керівництва компаній, тому їхня конкурентоспроможність, передусім, залежить від своєчасності реагувати на глобальні тренди і виклики в області ІТ-технологій. ІТ-розробники, як засвідчили дослідження, найбільше концентрують свою увагу на розв’язанні проблем постачальників транспортних послуг — на них надає понад 90 % усіх респондентів. Також потрібно відмітити, що понад 80 % ІТ-рішень у вертикальній спеціалізації зосереджено в галузі сільського господарства щодо виробництва, транспортування та гуртової торгівлі. Попри зазначені досягнення, менше ніж 40 % компаній використовують технологію для контролю продуктивності ланцюгів поставок. У зв’язку зі зростанням складності відправлення вантажовідправниками вантажів клієнтам, багато компаній звертаються до допомоги так званої 3PLs (third-partylogistics). Проведені дослідження показали, що понад 80 % усіх вантажовідправників використовують 3PLs, що допомагає їм підвищити якість обслуговування клієнтів. Серед компаній, які впроваджують і використовують досягнення ІТ-технологій у своїй логістичній діяльності, можна виділити Maersk, Schneider, LufthansaCargo, SAS CargoGroup A/S, AsstrA та ін. Зазначені ІТ-рішення дали таким компаніям можливість більш ефективно контролювати і координувати доставку вантажів, інтегрувати інтерфейси вантажовідправника та клієнта в єдину мережу, оптимізувати роботу власних підрозділів, знизити логістичні витрати тощо. Це також підтверджується й тим фактом, що понад 60 % усіх старших керівників, які причетні до роботи транспорту на підприємствах, відчули суттєві позитивні зміни глобальних перетворень. Ключові слова: інновації, ІТ-технології для потреб логістики, ІТ-рішення, логістичні компанії, логістичні послуги. Формул: 0; рис.: 0; табл.: 2; бібл.: 21.

Exploring the trading embodied CO2 effect and low-carbon globalization from the international division perspective

This paper explores the embodied CO2 emission effect by measuring the marginal net trading embodied CO2 emissions and decomposing the exporting embodied CO2 emissions from the international division perspective. The result shows that 38.5% of the studying countries were not beneficial to the low-carbon globalization in 2009. The trading CO2 emission effect of China and the US both satisfied the low-carbon globalization standards, but the international division types between China and the US were quite different. Decomposition of the vertical specialization embodied CO2 emissions suggests that the CO2 emissions embodied in the foreign value of China's exporting products were mainly included in the final products. By contrast, the CO2 emissions embodied in the foreign value of the US' exporting products were majorly contained in the intermediate goods. The result indicates that China mainly located at the downstream and the US majorly located at the upstream in the global value chain. The carbon RCA shows that labor-intensive manufacturing and knowledge-intensive manufacturing of China as well as capital-intensive manufacturing and service industries of the US had carbon revealed comparative disadvantages. The future international division cannot simply consider traditional multilateral trading profits but should also consider the trading CO2 emission effect in the low-carbon globalization context.