Working Paper: NBER ID: w17961
Authors: Gordon H. Hanson
Abstract: In this paper, I examine changes in international trade associated with the integration of low- and middle-income countries into the global economy. Led by China and India, the share of developing economies in global exports more than doubled between 1994 and 2008. One feature of new trade patterns is greater South-South trade. China and India have booming demand for imported raw materials, which they use to build cities and factories. Industrialization throughout the South has deepened global production networks, contributing to greater trade in intermediate inputs. A second feature of new trade patterns is the return of comparative advantage as a driver of global commerce. Growth in low- and middle-income nations makes specialization according to comparative advantage more important for the global composition of trade, as North-South and South-South commerce overtakes North-North flows. China's export specialization evolves rapidly over time, revealing a capacity to speed up product ladders. Most developing countries hyper-specialize in handful of export products. The emergence of low- and middle-income countries in trade reveals significant gaps in knowledge about the deep empirical determinants of export specialization, the dynamics of specialization patterns, and why South-South and North-North trade differ.
Keywords: No keywords provided
JEL Codes: F10
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Global production networks (F60) | Facilitate trade through comparative advantage and specialization (F11) |
| Industrialization of China and India (O14) | Driving up exports from developing countries (O19) |
| Integration of China and India into the global economy (F69) | Significant increase in their share of global exports (F10) |
| Economic integration (F15) | Trade expansion for low and middle-income countries (F14) |
| Economic growth of emerging economies (China and India) (O53) | Changes in global trade dynamics (F69) |
| Return of comparative advantage (F11) | Key driver of global trade (F19) |
| Economic policies of China and India (F68) | Rapid evolution in export specialization (F14) |