Vertical Industry Specialisation and Trade

Abstract: The rise of global supply chains has been subject to much attention in recent literature. However most work has been done within traditional trade frameworks. This leads to a narrow view of global supply chains as it implies countries specialise in vertical stages of the production process. While current literature confirms that country-level vertical specialisation is an important factor of trade, little can be said of the determinants of specialisation. We propose that an industry's position in a global supply chain determines its ability to gain from trade. We verify empirically that production integration from the EMU was more beneficial for industries in the middle of a supply chain compared to those at either extreme.