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Title: Vertical Specialization of Production: A critical Review of the theoretical and Empirical Evidence
Fri, May 27, 4:15 to 5:45pm, TBAAbstract
This paper reviews the phenomenon of Vertical Specialization (VS) examined from the different empirical approaches, starting with the conceptualization of VS, going through the problems with measurement and finishing with a case study. The empirical estimation of this paper refers to the Mexican manufacturing industry and the in-bond industry (also known as maquiladora). A significant component of the Mexican manufacturing trade has been the participation of maquiladoras until 2006 when its flows became a part of total trade measurement. The purpose of this paper is to compare VS, through the use of Vertical Intra-Industry Trade (VIIT) indexes, for the maquiladora and non-maquiladora industry and to contrast the degree to which the maquiladora industry is integrated with the global valued chain against the non-maquiladora activities for the 1994-2006 period. Furthermore, this paper will measure VIIT during the post-maquiladora period (2007-2013) in order to discuss if there have been changes in the VIIT since the conclusion of the maquiladora program in 2006. In particular this paper tests if the quality ladder hypothesis applies to Mexico. In this respect, the present article will focus on the changes produced in the VIIT of parts and components after the elimination of the maquiladora program. It is expected to find that during the maquiladora years, the vertical IIT reflected back and forth transactions with high shares of imported content in its exports (downstream in the supply chain). Since there was no need to keep the maquiladora program under NAFTA, it is expected to find an increase of high quality VIIT which would be evidence of a step up in the quality ladder production (upstream of value chain) for the post-maquiladora period. If that is not the case, then trade integration has not improved Mexican industry achieve the quality upgrading of products.