Specialization and Gain from Trade
How does Specialization allow for a Gain from Trade?
Written by J. Mance Gordon
Updated at April 23rd, 2024
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How does Specialization allow for a gain from Trade?
Consider the category of machinery, where the U.S. economy has considerable intra-industry trade. Machinery comes in many varieties, so the United States may be exporting machinery for manufacturing with wood, but importing machinery for photographic processing. The underlying reason why a country like the United States, Japan, or Germany produces one kind of machinery rather than another is usually not related to U.S., German, or Japanese firms and workers having generally higher or lower skills. It is just that, in working on very specific and particular products, firms in certain countries develop unique and different skills
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