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Group: Bryce Hollingsworth, Meiyi Cheng, Daniel Mena, James Hill

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Emerging Economies in Global Trade

South-South Trade

International Specialization

Dynamics in Specialization

Hyper-specialized Exporters

Final Discussion

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South-South Trade

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Urbanization and industrialization in China and India Increased demand for raw materials Developing economies are the supply sources

Growth has deepened global production networks

Increased cross-border flows

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South-South Trade

Exports from low-income countries to low- and middle-income markets have risen dramatically

From 1994-2008, 24% to 42%, with China and India accounting for half of this growth

Exports from middle-income countries to low- and middle-income markets have also risen

From 33% to 46%, with China and India accounting for two-fifths of this growth

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South-South Trade

Growth in South-South trade is a major part of the recent global trade boom

Falling trade barriers and expanding global production networks have contributed to Southern trade growth

However, they are insufficient on their own to explain why trade to GDP ratios have risen so much in low- and middle-income countries

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International Specialization

9 non-oil exports in this paper

1. Agriculture and food products

2. Minerals and other raw materials

3. Footwear, apparel, and textiles

4. Metals

5. Chemicals

6. Machinery

7. Electronics

8. Transportation equipment

9. Other manufactures

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International Specialization

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International Specialization

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A closer look at China – Dynamics of Specialization

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Hyper-Specialized Exporters

What we have seen

Country specialization by broad sector appears to be consistent with standard models of comparative advantage.

Over a period of time, specialization patterns tend to evolve rapidly most likely due to factor accumulation. (Ex. China)

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What is Hyper-specialization?

It involves breaking up a sector that is already being specialized and going into more depth in each of the new parts (PowerPoint example).

In their research, they found that low- and middle-income countries have a fine degree of specialization in a relatively small number of products.

This specific type of hyper-specialization does not fit standard trade models easily.

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What is Hyper-specialization?

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What is Hyper-specialization?

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Not just Low-income Countries

Specialization is not solely a function of having small economies.

Middle income economies also hyper-specialize (2008 Examples).

Exports of most countries are concentrated in a small number of goods.

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What Explains Hyper-Specialization in Exporting?

Melitz model(2003) that incorporates Heckscher-Ohlin model? Not quite

Eaton and Kortum(2002) take on the Ricardian model?

Rodik, Easterly, and Reshef(2009).

Ideal Model.

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Final Discussion

Middle-income nations are transforming the global economy

Questions need to be answered: How much of the recent growth in global trade

represents real value added? What explains hyper-specialization in exporting? Is China’s government pushing the country up the

product ladder? What effect has the global commodity boom had on

living standards in low-income countries?

Econ 366

Group: Bryce Hollingsworth, Meiyi Cheng, Daniel Mena, James Hill