Vertical specialization and three facts about U.S. international trade

Abstract We generate stylized facts about three aspects of U.S. international trade over the past 35 years: intermediate goods trade; manufactured goods exports relative to services exports; and multinational affiliate sales relative to exports. Further, we show how the concept of vertical specialization, as defined by Hummels, Ishii, and Yi [Hummels, D., Ishii, J., & Yi, K.-M. (2001). The nature and growth of vertical specialization in world trade. Journal of International Economics, 54, 75–96] can provide insight into each fact. Our main findings are: (1) trade in intermediate goods (as a share of total trade) has not increased, but trade in vertical specialized goods has; (2) the vertically specialized nature of production coupled with likely differences in accounting can account for about two-thirds of the increase in manufacturing exports, as well as the lack of growth in services exports (as a share of total exports); (3) vertical specialization has contributed to the fact that exports and multinational affiliate sales have grown at similar rates in the past 15 years.

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