Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/244240 
Year of Publication: 
2020
Series/Report no.: 
Working Paper No. 2020-26
Publisher: 
Federal Reserve Bank of Chicago, Chicago, IL
Abstract: 
Motivated by increasing trade and fragmentation of production across countries since World War II, we build a dynamic two-country model featuring sequential, multistage production and capital accumulation. As trade costs decline over time, globalvalue-chain (GVC) trade expands across countries, particularly more in the faster growing country, consistent with the empirical pattern. The presence of GVC trade boosts capital accumulation and economic growth and magnifies dynamic gains from trade. At the same time, endogenous capital accumulation shapes comparative advantage across countries, impacting the dynamics of GVC trade: a country becoming more capital abundant concentrates more on the capital-intensive stage of the production.
Subjects: 
Multistage production
International trade
Capital accumulation
JEL: 
F10
F43
E22
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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