Products Within The Division Of Labor And Trade Determinants

With the deepening of economic globalization and the development of revolution in science and technology, international specialization extends its level from product to infra-product process. Intra-product specialization and infra-product trade have become to increase since1970s. The infra-product trade based on the fragmentation which is in accordance with the differences of resource endowments, production technology, transaction costs, institutions and other factors splits the production process into different stages and different countries, which brings about this new kind of specialization system.Traditional trade theory based on the comparative advantage and the new trade theory based on scale economy and imperfect competition can also explain the causes of intra-product specialization and trade. However, some questions about this specialization, such as choices of organizational form, cannot be explained by the trade theory. Therefore, new theories need to be added in order to improve the explanation of infra-product specialization. Since year 2000, some economists analyze the micro-basis related to international trade theory, causes and economic effects of international intra-product specialization from industrial organization and contract theory. Based on the previous studies, this dissertation combines Grossman-Hart-Moore's imperfect contract theory with the international trade theory, establishes the theoretical model in the framework of Dixit-Stiglitz's monopolistic competition model, analyzes the emergence and organizational form choices of infra-product specialization from the view of imperfect contract, and discusses the effects of imperfect contract on infra-product trade. Meanwhile, this dissertation also discusses production choices between integration, i.e. FDI and non-integration, i.e. outsourcing, and analyzes the effects of capital intensity and residual control rights on the infra-product specialization and trade.This dissertation consists of six parts. Introduction defines the intra-product specialization, trade and other related concepts, introduces research background, theoretical and practical significance, study motifs, structure, contributions and issues to be discussed. Chapter 1 is the literature review which outlines the related literature about the causes of intra-product specialization and trade, choices of organizational form. This part also introduces measurement of intra-product specialization and trade. Chapter 2 is the theoretical basis which analyzes the causes of intra-product specialization under the framework of international trade theory. Next, this part establishes the theoretical model in the framework of Dixit-Stiglitz's monopolistic competition model, analyzes the emergence and organizational form choices of intra-product specialization from the view of imperfect contract, and discusses the effects of imperfect contract on intra-product trade. Chapter 3 firstly introduces the situation of Asian Economies' intra-product specialization, compares the situations of every economy according to the indices of RCA and ESI. Secondly, this chapter analyzes China's situation and problems in intra-product specialization and trade in the form of processing trade. Thirdly, by using the input-output analysis, this chapter calculates the vertical specialization index of Chinese industries' export, which further analyzes the degree of China's participation in intra-product specialization and trade. Chapter 4 establishes empirical model of intra-product trade of Asian Economies in 1996-2007, analyzes the determinants. Next, this part makes dynamic analysis on the determinants by using the principal component analysis. Chapter 5 concludes the dissertation and gives related suggestions according to the situations of China's intra-product specialization and trade.This dissertation arrives at the following major conclusions. Firstly, under conditions of incomplete contract, if the product is capital-intensive, company will choose FDI approach to produce and trade; if the product is labor-intensive, will choose outsourcing approach to produce and trade. Secondly, compared with the complete contract condition, incomplete contract will make the investment inefficiency in capital and labor, increase the final product's price, and distort the structure of income distribution. Thirdly, incomplete contract will not change the traditional specialization and trade pattern. Capital intensive intermediates will be produced by capital abundant countries through the integration pattern; labor intensive intermediates will be produced by labor abundant countries through the non-integration pattern. Fourthly, trade volume of intra-product trade within Asia surpasses the volume of trade outside the region. Furthermore, developing economies have achieved the industrial upgrading, so the structure of intra-product trade between developed countries and developing countries are similar. Fifthly, the degrees of China's participation in intra-product specialization and trade shows that this index keeps increasing in recent 10 years, whereas decreases slightly in 2007 caused by international financial crises. By industries, VS indices show that the degree of mechanical industry is high; degrees of textile and clothing industry are relatively low. Sixthly, endowments, infrastructure, contractual environment are the driving force of attracting international production and the determinants of intra-product specialization and trade.The main contributions of this dissertation are as follows. Firstly, extend the object and concept of traditional comparative advantage, from the inter-industry, intra-industry to intra-product specialization. Some factors, such as contractual environment, transaction cost and infrastructure, are included to the broad comparative advantage. Secondly, make deep analysis on the micro-basis of intra-product specialization, i.e. the form of industrial organization. Because the original trade theory difficult to explain the micro problems of intra-product specialization, the introduction of imperfect contract theory to the trade theory can explain the causes and micro basis of intra-product specialization and trade. Thirdly, on the basis of Dixit-Stiglitz imperfect competition, differentiated products model, establish theoretical model, combines the comparative advantage, scale economy and incomplete contract theory to analyze the organizational form and trade pattern. Fourthly, by using the regression analysis and principal component analysis, analyze the intra-product trade structure of Asia 10 economies, make dynamic assessment and comparison of determinants of every economy.