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《Integration of Trade and Disintegration of Production》.pdf
Integration of Trade and Disintegration of Production
in the Global Economy
Robert C. Feenstra
Revised, April 1998
Forthcoming, Journal of Economic Perspectives.
Robert C. Feenstra is Professor of Economics, University of California, Davis, California; Visiting
Professor of Economics, Haas School of Business, University of California, Berkeley, California; and
Research Associate, National Bureau of Economic Research, Cambridge, Massachusetts.
Abstract
The last few decades have seen a spectacular integration of the global economy through
trade. The rising integration of world markets has brought with it a disintegration of the
production process, however, as manufacturing or services activities done abroad are combined
with those performed at home. I compare several different measures of foreign outsourcing, and
argue that they have all increased since the 1970s. I also consider the implications of
globalization for employment and wages of low-skilled workers, and for trade and regulatory
policy, such as labor standards.
The last few decades have seen a spectacular integration of the global economy through trade.
The share of imports (or exports) in GDP for the United States has approximately doubled in the last
two decades, and if intra-OECD trade is omitted, the same is true for the OECD countries generally.
Trade does remain a seemingly small fraction of U.S. GDP. This is not surprising in view of the fact
that large economies trade less with others, and more internally. But the modest share of trade in total
national income hides the fact that merchandise trade as a share of merchandise value-added is quite
high for the U.S. and the OECD, and has been growing dramatically. In fact, if one focuses on
merchandise trade relative to va
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