Specialization within global value chains: The role of additive transport costs

This paper studies the factors of comparative advantage within global value chains relying on a framework where comparative advantage is measured through the interaction of country and industry characteristics.

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We find that good institutions give a comparative advantage in the later stages of the production process, whereas good transport infrastructure gives an advantage in the early stages of production. We explain these results with a simple theoretical framework that shows how predicted patterns of specializations depend on whether trade costs are additive or multiplicative.

No: ERSD-2018-05

Authors: Rainer Lanz and Roberta Piermartini

Manuscript date: April 2018

Key Words:

Global value chains, quality of transport infrastructure, quality of institutions, comparative advantage, upstreamness, production networks, trade costs

JEL classification numbers:

F13, F14, L60

Disclaimer

This is a working paper, and hence it represents research in progress. The opinions expressed in this paper are those of its author. They are not intended to represent the positions or opinions of the WTO or its members and are without prejudice to members' rights and obligations under the WTO. Any errors are attributable to the author.

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