NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Do Developed and Developing Countries Compete Head to Head in High-tech?

Lawrence Edwards, Robert Z. Lawrence

NBER Working Paper No. 16105
Issued in June 2010
NBER Program(s):   ITI

Concerns that (1) growth in developing countries could worsen the US terms of trade and (2) that increased US trade with developing countries will increase US wage inequality both implicitly reflect the assumption that goods produced in the United States and developing countries are close substitutes and that specialization is incomplete. In this paper we show on the contrary that there are distinctive patterns of international specialization and that developed and developing countries export fundamentally different products, especially those classified as high tech.

Judged by export shares, the United States and developing countries specialize in quite different product categories that, for the most part, do not overlap. Moreover, even when exports are classified in the same category, there are large and systematic differences in unit values that suggest the products made by developed and developing countries are not very close substitutes--developed country products are far more sophisticated.

This generalization is already recognized in the literature but it does not hold for all types of products. Export unit values of developed and developing countries of primary commodity-intensive products are typically quite similar. Unit values of standardized (low-tech) manufactured products exported by developed and developing countries are somewhat similar. By contrast, the medium- and high-tech manufactured exports of developed and developing countries differ greatly.

This finding has important implications. While measures of across product specialization suggest China and other Asian economies have been moving into high-tech exports, the within-product unit value measures indicate they are doing so in the least sophisticated market segments and the gap in unit values between their exports and those of developed countries has not narrowed over time.

These findings shed light on the paradoxical finding, exemplified by computers and electronics, that US-manufactured imports from developing countries are concentrated in US industries, which employ relatively high shares of skilled American workers. They help explain why America's nonoil terms of trade have improved and suggest that recently declining relative import prices from developing countries may not produced significant wage inequality in the United States. Finally they suggest that inferring competitive trends based on trade balances in products classified as "high tech" or "advanced" can be highly misleading.

download in pdf format
   (320 K)

email paper

This paper is available as PDF (320 K) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w16105

Users who downloaded this paper also downloaded these:
Edwards and Lawrence w16106 US Trade and Wages: The Misleading Implications of Conventional Trade Theory
Wang and Whalley w16142 The Trade Performance of Asian Economies During and Following the 2008 Financial Crisis
Alfaro, Conconi, Fadinger, and Newman w16118 Do Prices Determine Vertical Integration?
Metcalf, Mathur, and Hassett w16101 Distributional Impacts in a Comprehensive Climate Policy Package
Michaels, Natraj, and Van Reenen w16138 Has ICT Polarized Skill Demand? Evidence from Eleven Countries over 25 years
 
Publications
Activities
Meetings
NBER Videos
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us