Trade Integration, Global Value Chains, and Capital Accumulation

42 Pages Posted: 16 Nov 2020 Last revised: 29 Sep 2024

See all articles by Michael Sposi

Michael Sposi

Southern Methodist University (SMU)

Kei-Mu Yi

University of Houston

Jing Zhang

University of Michigan at Ann Arbor

Multiple version iconThere are 3 versions of this paper

Date Written: November 2020

Abstract

Motivated by increasing trade and fragmentation of production across countries, accompanied by income convergence by many emerging economies, we build a dynamic two-country model featuring sequential, multi-stage production and capital accumulation. As trade costs decline over time, global-value-chain (GVC) trade expands across countries, particularly more in the faster growing country, consistent with the empirical pattern. Via Heckscher-Ohlin forces, GVC trade can generate back-and-forth feedback between comparative advantage and capital accumulation (growth). Moreover, GVC trade increases both steady-state and dynamic gains from trade.

Suggested Citation

Sposi, Michael and Yi, Kei-Mu and Zhang, Jing, Trade Integration, Global Value Chains, and Capital Accumulation (November 2020). NBER Working Paper No. w28087, Available at SSRN: https://ssrn.com/abstract=3731256

Michael Sposi (Contact Author)

Southern Methodist University (SMU) ( email )

6212 Bishop Blvd.
Dallas, TX 75275
United States

Kei-Mu Yi

University of Houston ( email )

Jing Zhang

University of Michigan at Ann Arbor ( email )

500 S. State Street
Ann Arbor, MI 48109
United States

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