Vertical Specialization: Division Of Labor Based On Division Of Labor Interests And Practice

Since David Ricardo set up the theory of Comparative Advantage, subsequent scholars have been devoting their attention to the factors that decide and affect comparative advantage. The traditional theory of Comparative Advantage is considered as only explaining the inter-industry vertical trade that commonly exists between developed countries and developing countries. The intra-industry horizontal trade that mainly takes place within developed countries is thought to be explained by the New Trade Theory. The theory of Comparative Advantage and the New Trade Theory are looked as complementing each other.During the past decades, there have been dramatic changes in international trade, and at the same time as well as a rapid development of Vertical Specialization, which has deepened international specialization with the new form of specialization that countries specialize in particular production stages of a particular good, and are involved hi vertical trade of intermediate goods with final goods within same particular industry. Since vertical specialization mainly takes place between developed countries and developing countries, and concerns intra-industry vertical trade as well as intermediate goods trade, we need a new analytical framework to study its trade basis and trade pattern. This paper develops two basic theoretic models, the first one is focused on the inquisition of the nature of Vertical Specialization, using analytical frame of H-O theory to explain the basis for and the gains from Vertical Specialization; the second one is an enlarged multi-products model in which an additional analysis is made to the influences of trade barriers upon Vertical Specialization. Additionally, this essay analyzes China's assembly trade by which China engages in verticalspecialization.This essay can be divided into two parts. The first part includes the first three chapters, which analyze vertical specialization both theoretically and empirically. The second part includes the last two chapters, which mainly studies China's assembly trade and puts forward some suggestions. No.2 chapter (Theoretical Study of Vertical Specialization) and No.4 chapter (Assembly Trade: China's Main Way to Engage in Vertical Specialization) are the most important two chapters.No.l chapter includes the following content: raising the main theme, giving definition of vertical specialization, summing up literatures related with vertical specialization.In No.2 chapter, vertical specialization is studied theoretically. Two basic theoretic models are set up and analyzed.In No.3 chapter, vertical specialization is studied in a empirical way. This part is a connecting link between the preceding chapters and the following ones.In No.4 chapter, we study the two aspects of China's assembly trade: one is the quantitative side, the other is the structural side. Furthermore, we evaluate China's assembly trade.In No.5 chapter, we illustrate the characteristics of contemporary vertical specialization, and put forward some suggestions for China.