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The Role of Services in Production and International Trade: A Theoretical Framework
Abstract
attempt to uncover an all-encompassing definition of tertiary activities, in the present paper we deliberately avoid this issue, as~ing instead what services do. We share in common with other observers the conviction that it is important to liberalize regulations covering services and international trade, but depart from the dominant focus on estabiishlng the determinants of comparative advantage in services. Instead of trying to ascertain which countries will end up exporting or providing services, we concentrate on the manner in which developments in the service sector have encouraged and promoted the general level of international trade in goods. In asking what services do, we acknowledge the importance of retail activities in facilitating the absorption of the nation's output by its consumers. Other activities, such as those provided by the medical and legal prOfessions, link in a more direct fashion producers and consumers of services. In the present paper we shift attention from these consumption activities to the way in which services are involved in the production process. Two key concepts are introduced: production blocks and service links. The paper discusses how, with growth of a' firm's output level, increasing returns and the advantages of specialization of factors within the fIrm encourage a sWitch to a production process with fragmented produc- tion blocks connected by service links. These links, bundles of activities consisting of coordination, adptinistration, transportation, and financial services, are.. increasingly demanded when the fragmentation of the production 'process allows joint use of production blocks located in
... D'où le rôle fondamental de la chaîne de valeur dans l'identification des sources des avantages concurrentiels. Source : A partir de Porter (1985) Porter est certainement celui qui a contribué le plus à faire que la notion de « chaîne de (Jones et Kierzkowski, 1988 ;Deardorff, 1998 ;Venables, 1999), de « Intra-product Specialization » (Arndt, 1997), de « Outsourcing » (Feenstra, 1998), de « Production Sharing » (Yeats, 1998 ;Milberg, 2004), de « Vertical Specialization » (Hummels et al., 1998), de « International Production Networks » (Borrus et al., 2000), de « Offshoring » (Grossman et Rossi-Hansberg, 2006), voire de « Supply Chains 4 » (Costinot et al., 2013 ;Park et al., 2013). Ces différentes désignations font référence au même objet d'étude. ...
... Si les activités concernées par ces mouvements durant les années 1990 étaient limitées aux tâches les plus simples et les plus intensives en capital humain, aujourd'hui ces mouvements s'étendent et couvrent presque toutes les activités de la chaîne (Nicita et al., 2013). Ainsi, une littérature s'est développée autour des mouvements de délocalisation et d'externalisation pour étudier les causes de leur expansion (Jones et Kierzkowski, 1988 ;Krugman, 1995 ;Deardorff, 1998 ;Feenstra, 1998 ;Hummels et al., 1998 ;Yeats, 1998 ;Chevassus-Lozza, 1999 ;Hillberry, 2011 ;Baldwin, 2012) et leurs effets sur le commerce, les emplois et les salaires (Krugman, 1995 ;Leamer, 1996 ;Palpacuer, 2000 ;Palpacuer et Parisotto, 2003 ;Jones et Kierzkowski, 2004). ...
... L'objectif de ces recherches est de savoir si le déploiement des CGV est compatible avec un univers de concurrence parfaite (Deardorff, 1998(Deardorff, , 2005Venables, 1999 ;Markusen et Venables, 2007 ;Globerman, 2011). La seconde branche cherche à intégrer les CGV à des modèles de concurrence imparfaite, soit en suivant les pistes de la « nouvelle » théorie du commerce international (rendements d'échelle croissants, géographie économique) (Krugman, 1980 ;Jones et Kierzkowski, 1988 ;Arndt et Kierzkowski, 2001 ;Yomogida, 2007 ;Arndt, 2015), soit en explorant celles de la « nouvelle nouvelle » théorie du commerce international (hétérogénéité des firmes) (Melitz, 2003 ;Grossman et Rossi-Hansberg, 2006 ;Costinot et al., 2013). ...
Les chaînes globales de valeur (CGV) s’avèrent être un des traits majeurs du commerce et des investissements internationaux. L’expansion de ces chaînes durant les trois dernières décennies a réanimé plusieurs débats, et notamment ceux relatifs au choix de spécialisation par les pays et au rôle de la politique industrielle dans le processus de développement. Ce dernier constitue le postulat de départ de la présente thèse qui cherche, à travers une revue de littérature policy oriented, à catégoriser les instruments politiques renforçant la participation des pays en développement aux CGV en les regroupant sous une seule politique désignée par « politique industrielle orientée vers les CGV ». Cette dernière englobe des instruments relatifs à la politique commerciale, fiscale, d’éducation, d’innovation et à l’environnement des affaires.La littérature consacrée aux politiques de la participation aux CGV privilégie nettement la voie de la participation industrielle, celle de la participation par le secteur manufacturier. Elle tend même à y voir la seule option possible pour les pays en développement. Notre étude livre sur ce point un résultat différent : il n’y a pas une mais deux voies (positionnements) au moins qui s’ouvrent aux pays qui font le choix de la participation aux CGV. L’option du « positionnement industriel » en est une. Celle du « positionnement commercial » en est une autre et elle n’est pas a priori une option de second rang ou une option par défaut. Elle constitue même l’option préférentielle pour les pays ayant des capacités industrielles limitées.Cette thèse entreprend de tirer des enseignements généraux de deux études empiriques. La première visant à tester l’impact des instruments politiques identifiés par la revue de littérature sur la participation des pays à revenu intermédiaire de la tranche supérieure aux CGV. La deuxième cherchant à identifier les facteurs affectant le choix de positionnement au sein des CGV. Ces études nous ont permis de confirmer le rôle clé de certains instruments politiques dans l’amélioration de la participation de ces pays aux CGV. Une étude du cas du Liban est menée afin d’approfondir notre analyse du positionnement commercial en projetant les facteurs identifiés dans les études empiriques sur le cas de ce pays. Nous soulignons les limites et les avantages que la politique libanaise procure au Liban afin d’envisager les orientations possibles de cette politique pour assurer une meilleure intégration du pays aux CGV.
... In Jones and Kierzkowski (1990)'s language, lower coordination cost leads to more frequent use of "service links" between "production blocks". (See Fig. 3 for visualization.) ...
... Their subsequent empirical study in Jones, Kierzkowski and Lurong (2005) confirms the theory's predictions that trade in parts and components expands as services become less costly. Jones and Kierzkowski (1990) are some of the first ones to formally map out the pattern of fragmentation. Baldwin and Venables (2013) investigate the relation between the engineering of the production process and offshoring. ...
This paper is motivated by two observations in the large civil aircraft (LCA) industry. (1) Boeing and Airbus are significantly different in the degree of offshoring. (2) The degree of offshoring also changes among different aircraft models. To offer an explanation, this paper focuses on issues related to fragmentation. Existing literature has established the tie between fragmented technology and offshoring. However, it is assumed that production can be fragmented readily and at no cost; and only exogenous global economic factors have impact on the degree of fragmentation. This model distinguishes itself from others by incorporating endogeneity in fragmentation. A final-good firm can spend on R&D specifically for its own fragmented technology. As a result, the final-good firm can optimally choose the portion of components to be offshored. A strategic trade policy model is used to show that the degree of offshoring depends on the firm's own cost of production, the host country's cost of production, the global state of technology as well as the government trade policies. In particular, export subsidy and subsidy on R&D of fragmented technology are shown to be policy substitutes.
... This paper focuses on the division of labour according to business functions -or value-chain functions 1 -which represent one of the new dimensions of specialisation that have accompanied the fragmentation of production processes across different locations Kierzkowski, 1990, 2001). Such a fragmented mode of production implies that different 'blocks' of production (Jones and Kierzkowski, 1990) are linked with each other by services, such as transport, information and other business services. While this increasing specialisation in individual segments of the production processes can be seen as a direct application of Adam Smith's famous example of the pin factory, there is also a new element involved. ...
Geographically dispersed production networks have allowed countries to specialise in different functions of the value chain. By making use of two methodologies for quantifying the magnitude of functional specialisation – one based on trade flows and one based on FDI flows – detailed profiles of the functional specialisations of EU member states are identified. The analyses are conducted at the country, industry and regional level. In line with the existing literature, they reveal that EU-CEE countries are predominantly specialised in the fabrication stage, that is, they serve as ‘factory economies’, while the Western EU countries are mainly performing knowledge-intensive pre-fabrication activities – a characteristic of ‘headquarter economies’. This dualism within the EU is confirmed by a cluster analysis. While functional specialisation patterns tend to be persistent, especially in the fabrication stage, there are also some signs of functional diversification in EU-CEE countries in more recent years. Still, these functional changes remain limited to a few industries. The dichotomy of factory and headquarter economies is also clearly discernible at the regional level. However, the fact that in most EU countries – mainly in the capital regions – there are some headquarter-type regions implies that a complete functional ‘lock-in’ in fabrication is less likely than suggested by the country-level patterns. Hence, while the results point towards major difficulties of functional diversification beyond the fabrication stage in the EU-CEE countries and regions, there are also several promising elements and trends discernible, in particular at the industry and the regional level.
Post-Soviet countries have never been analysed in the global value chain (GVC) context. Therefore, in this study, we evaluate the degree of backward participation of GVCs in the manufacturing sector of post-Soviet countries. We also examine the quantitative linkage between GVCs and host countries’ logistics performance as a service-link component. We used the UNCTAD-Eora GVC database and employed a structural gravity trade model. The results illustrate a positive correlation between GVC backward participation in manufacturing and income levels in the post-Soviet economies. The empirical estimation using the structural gravity trade model demonstrates a quantitative linkage between GVC backward participation and the logistics performance of the host country. The level of logistics performance accounts for 70–80 percent of the degree of GVC backward participation. Our findings’ major policy implication is that post-Soviet economies’ logistics performance should be improved by erasing the Soviet era’s negative legacy. JEL Codes: F12, F13, F14, O57. Keywords: Global value chains, Logistics performance, Post-Soviet countries, Manufacturing, Structural gravity trade model.
Nowadays world trade, investment and production are increasingly built within the framework of global value chains (GVCs), which, as the flagships of the modern economy, form the main directions and pace of development, including both developed and developing countries. China’s accession to the WTO in 2001 entailed not only the strengthening of China’s role in world trade and production, but also symbolized the beginning of China’s accelerated integration into the GVCs. Initially, China was of interest to developed countries as a location with a relatively cheap labour force, but gradually its role in the GVCs changed, and China turned into the largest exporter of intermediate and final demand products in industrial supply chains, primarily in the automotive and electronics industries. In this monograph, the authors aimed to trace kea features, trends and prospects for China’s participation in global value chains.
We employ a multi-country firm-level data covering 109 developing countries during the 2005-2017 period to investigate the effect of bribery on the global value chain (GVC) decision for firms and the moderating roles of firm size and institutional constraints in such relationships. In this research, we treat the GVC participation as a strategic choice and GVC firms are defined as two-way traders who export and import simultaneously and hold a quality certification. We also distinguish GVC decisions into GVC participation decisions that firms decide to carry out GVC activities and GVC switching decisions that firms decide to switch from non-GVC to GVC status. Institutional constraints are firms’ self-ration on corruption, political stability, court, and customs and trade regulations. Our empirical findings support the “greasing-the-wheels-of-GVC” hypothesis that greasing bribery positively influences the GVC participation and switching probability. Paying greasing bribes only improves the small and medium-sized firms’ probability of becoming GVC actors if there is no institutional constraint. With sufficiently strong bargaining power, large-sized firms grasp more benefits from bribe payments even in the weak and poor institutional system, thus becoming a part of global supply chains. Finally, when we control the endogeneity, the impacts of greasing become more sizable and we find evidence for the “sanding-the-wheels-of-GVC” hypothesis of rent-seeking bribery.
In this article, we study corporate behavior and develop a model for trends and factors in Japanese Multinational Corporations (MNCs) in the electrical and electronic industry that have played an important role in the economic development of East and Southeast Asia. We focus on Thailand, where Japanese MNCs are still increasing, and examine the practical applicability of the model. Basically, the model will be developed based on the existing flying geese model and regional agglomeration, but it will also be developed to explain new events such as progress in the division of labor by fragmentation and intra-regional agglomeration in East and Southeast Asia. Japanese MNCs in the electrical and electronic industry have shifted their production bases to developing countries one after another, as a variant of the third type of flying geese model. While the network of the international division of labor is forming with the development of fragmentation, the area around the eastern seaboard from Bangkok is playing an increasingly important role in the network of Japanese companies. In that sense, this study contributes to the body of literature on flying geese models with a modified model embodied with dynamic and systematic features of the ASEAN integrated economies.
Technical, technological, IT and organisational progress is most evident in industry. In a situation where innovations are accompanied by structural and political changes, it is all about restructuring. In Poland, restructuring processes occurred most frequently in the 1990s. Currently, the phenomenon still occurs, but on a much smaller scale, with the transformations concerning generic, personnel and processes structures. The textile industry is still significant and is a hallmark of the Łódź region in Poland. The recent past has shown that companies from the textile industry, although very fragmented, remain on the market and are doing well in the new economic system. The purpose of the study is to assess the financial condition of municipalities and cities with district rights in the context of the restructuring activities of the textile sector, with particular emphasis on local government units of the Łódź region in the years 2007-2017. The work consists of three parts. In the first, the authors include theoretical premises for the restructuring of enterprises. The second part contains research hypotheses which have been empirically verified with an econometric model developed in the last part of the work. The purpose of the econometric model is to describe the relationship between the self-financing indicator and the explanatory variables, which largely describe the financial condition of enterprises in the textile sector in Poland over the period between 2007 and 2017. The results of the research conducted allow to conclude that the financial condition of communes and cities with district rights is diverse, and is affected by factors related to the location, type and level of development of local government units. In addition, the restructuring which took place in industry, in particular the textile industry, had a positive impact on the financial condition of local governments, in particular on their level of self-financing.
Location of new products, 191. — The maturing product, 196. — The standardized product, 202.
Introducing their chapter on ‘Differentiated Products and Economies of Scale’ Grubel and Lloyd (1975) distinguish various groups of products, differing from each other according to two criteria: similarity of input requirements and substitutability in end use. The products serving as examples comprise final consumer goods such as cars and cigarettes, but also intermediate products as yarn and steel bars. Later on in their chapter when discussing the ‘nature of product differentiation and trade’, examples offered refer to consumer goods only.
My subject may appear alarmingly formidable, but I did not intend it to be so. The words economic progress, taken by themselves, would suggest the pursuit of some philosophy of history, of some way of appraising the results of past and possible future changes in forms of economic organisation and modes of economic activities. But as I have used them, joined to the other half of my title, they are meant merely to dispel apprehensions, by suggesting that I do not propose to discuss any of those alluring but highly technical questions relating to the precise way in which some sort of equilibrium of supply and demand is achieved in the market for the products of industries which can increase their output without increasing their costs proportionately, or to the possible advantages of fostering the development of such industries while putting a handicap upon industries whose output can be increased only at the expense of a more than proportionate increase of costs. I suspect, indeed, that the apparatus which economists have built up for dealing effectively with the range of questions to which I have just referred may stand in the way of a clear view of the more general or elementary aspects of the phenomena of increasing returns, such as I wish to comment upon in this paper…