Vertical Specialization And Total Factor Productivity

Since the 1960 s, with the development of economic globalization, vertical specialization has further deepened and trade patterns have undergone major changes. As a new form of international division of labor, vertical specialization will have an impact on total factor productivity. Because of links and processes at different levels of economic development in the country involved in the participation in vertical specialization is different, moreover all aspects of the value-added chain to create value is not the same, then the countries involved in the division of the whole process whether the impact factor productivity are also different? In addition, total factor productivity can be further decomposed into technological progress and technical efficiency, then how the vertical specialization influence decomposition indicators? This is the focus of this paper to empirically test these problems.This paper attempts to take advantage of all the 40 countries’ input-output tables from the year of 1995 to 1996 provided by WIOD database and measures out vertical specialization index of countries, then explore different countries participating in the vertical specialization process whether have different effects to TFP and its decomposition indicators. The empirical results show: firstly: for the whole 40 countries, participating in vertical specialization helps to improve their total factor productivity, while for technological progress and technical efficiency it also has a positive role in promoting them; secondly: after adding the level of development, it indicates that the presence of vertical specialization promotion threshold effect on total factor productivity, and only when a country’ level of economic development reach the certain level, participating in vertical specialization can better promote their total factor productivity; thirdly: the decomposition of TFP- technological progress and technical efficiency can be drawn on the impact of vertical specialization and the effect of the impact is not the same.