A Study On The Relation Between The New International Labor Division And Global Imbalance

The Global imbalance problem has been the focus in the post-crisis era, especially the causes of the imbalance's formation and how to solve the global imbalance. Although the existing literatures have discussed the global imbalance problem in different perspectives, such as exchange rate & exchange rate system, fiscal deficits, financial efficiency differences and international division of labor et al, they cannot explained some facts happening in the global imbalance. This paper will explain the long-term & structural global imbalance problem in a new perspective—a kind of new international division of labors between service and manufacture industry. The main purpose to this paper is to analyze the mechanism of how the new international division of labor leading to the global imbalance, the reasons of how the new international division of labor evolution, and also make some empirical researches to test them. All these explanations will base on the context of globalization and the evolution history of the international division of labor.Since the industrial revolution and the mass production, the international division of labor has experienced four periods:the labor division between agricultural and industry countries, the labor division in intra-industries, the labor division in the value chain and labor division between service and manufacture industries. This paper has summed up the following causes of the new international labor of division:firstly, the different industry structures between the world countries—some developing countries are still in the industrial period, while others developed countries are in the post-industrial period, made the new international division of labor between service and manufacture possible. Secondly, as service and manufacture products have different factor intensities during the producing process, different factor endowments made some countries more suitable to produce service goods, and other countries more suitable to produce manufacture goods. Thirdly, the innovations of international production organizations are also help the formation of "service-manufacture" labor of division. Through empirical researches, this paper found that culture and institution factors played a more and more important role in the "service-manufacture" evolution. Japanese and Germany manufactures have a excellent comparative advantage mainly because their culture endowments are very suitable to manufacture. Using the 2005 cross-countries data, this paper has proved, no matter what by the OLS or considering the institutions endogenous IV estimation methods that, institution environment really had a distinct affect on the formation of service export's revealed comparative advantage (RCA). At the same time, the institution had a more obvious affect on the poorer countries'service export RCA than the ricers.The mechanisms of "service-manufacture" new international labor of division leading to global imbalance are:the dissymmetry freedom of trade between service trade and merchandise trade, the worse and worse income distributions in the "service" and "manufacture" countries, and the inherent defects of the international monetary system. Because the service trade is not as free as merchandise trade, the "service" countries usually have a large trade deficit. The worsening income distribution of "service" countries made their economy visualization, people excessive consumptions; the worsening income distribution of "manufacture" countries made their economy relative overproduction and insufficient domestic demand. The international monetary system provided the U.S having the exclusive right to affect the whole world economy through issuing U.S dollar. By empirical studies, even from the cross-countries or US-Sino trade data, this paper has proved that "service-manufacture" new international labor of division was the most important factor to bring on the global imbalance. At the same time, this paper has also test the robustness of the empirical studies by using different indexes to measure "service-manufacture" new international labor of division.As the "service-manufacture" new international labor of division may have some new changes in the post-crisis era, this paper has analyzed the sustainability of the new division and provided some reforms suggestions focusing in the economic restructuring and development model changes of China.