Across-Product Versus Within-Product Specialization in International Trade

Abstract

The unit values of US manufacturing imports vary widely within very narrowly defined products. In cross-section, unit values are higher for varieties exported by capital and skill abundant countries, and they increase with the capital intensity of exporters' production techniques. Over time, the same products increasingly are sourced from more disparate countries. These facts reject 'old' trade theory specialization across products but are consistent with such specialization within products: capital abundant countries use their endowment advantage to manufacture varieties that are superior in terms of quality or attributes to those produced by labor abundant countries. The facts are inconsistent with 'new' trade theory models that have producer price varying inversely with producer productivity because unit values are higher for the set of countries commonly thought to be more productive.

Firms’ main market, human capital, and wages

“…Furthermore, describing the current patterns of trade requires considering quality differentiation. International trade is decreasingly characterized by horizontal specialization across goods and increasingly characterized by quality specialization within goods (see Schott (2004); Hummels and Klenow (2005); Khandelwal (2007); and Fontagne et al (2008) among others). In this context, Hummels and Skiba (2004) have documented a positive relationship between export quality and transportation costs to destination market, in line with the well-known Alchian-Allen effect.…”

Can Comparative Advantage Explain the Growth of US Trade?

“…In fact, any of these elements could be combined with our stylized Heckscher-Ohlin model to provide a more realistic view of international trade. 5 In our framework, the dynamics generated by trade integration has a number of 4 See, among other references, Davis and Weinstein [7], [8], [9], Romalis [20], and Schott [22]. Notably, Davis and Weinstein [8] show that, against popular belief, factor endowments are quite important for North-North trade.…”

“…22 To minimize the approximation error, we optimally chose the collocation nodes among the zeros of Chebyshev polynomials: given the m zeros of T m 2 (x k) = k k 1 in k; k , we organize them into two (identical) vectors fk H;i g m i=1 and fk F;i g m i=1 and take their Cartesian product fk H;i g fk F;i g as the set of our collocation nodes. Table 3: Euler equation residuals absolute terms, i.e.…”

Dissecting intra-industry trade

“…Schott (2004) and Hallak (2006) provide evidence that within conventionally defined product categories, poorer countries tend to specialize in the production and export of lower quality varieties and vice versa for 6 They found that for Australia in 1968-69 this fraction varied from only 6.2% of trade at the 7-digit SITC to 42.9% at the 1-digit. 7 The E.U.…”