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Vertical specialization, global expansion of supply chain, and convergence

Published online by Cambridge University Press:  23 September 2024

Hamid Beladi ,
Sugata Marjit ,
Reza Oladi Open the ORCID record for Reza Oladi [Opens in a new window]  and
Sepideh Raei
Hamid Beladi
Affiliation:
University of Texas at San Antonio, San Antonio, TX, USA
Sugata Marjit
Affiliation:
Indian Institute of Foreign Trade, CES-Ifo, Hong Kong Polytechnic University, Munich, Germany
Reza Oladi*
Affiliation:
Department of Applied Economics, Utah State University, Logan, UT, USA
Sepideh Raei
Affiliation:
Department of Economics and Finance, Utah State University, Logan, UT, USA
*
Corresponding author: Reza Oladi; Email: [email protected]
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Abstract

In this paper, we construct an elaborate general equilibrium model with a continuum of production fragments for an intermediate good, then incorporate 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 things, 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 further address the effects of such a trade opening on wage inequality.

Keywords

vertical specializationtradegrowthinequalityF1
Type
Articles
Information
Macroeconomic Dynamics , Volume 29 , 2025 , e25
Copyright
© The Author(s), 2024. Published by Cambridge University Press

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