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Book Chapter


Economics (CMC)

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Preferential trade agreements between dissimilar economies are known to encourage inter-industry specialization, but when they take place between developed and developing countries, they also change the nature of intra-industry trade by facilitating cross-border production sharing. When such arrangements liberalize foreign direct investment as well as trade, production is internationalized and component or intra-product trade increases. Using a standard trade model, this paper derives the conditions under which integration of this type improves competitiveness and raises employment, output, and welfare.


First published in Globalization and Economic Growth: A Critical Evaluation.

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© 2002 Athenian Policy Forum Press

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