ECONOMICAL RETROSPECTIVE OF DEVELOPMENT OF VERTICAL SPECIALIZATION THEORY

Abstract

We explore the development of vertical specialization theory which is trade in goods across multiple stages of production on the relationship between trade and business cycle synchronization across countries. We study various papers about international trade model in which explores the degree of vertical specialization varying with trade barriers. We examine how and why these vertical specialization models created by economists and compare differences of those models. Since VS one of the most important changes involves the increasing interconnectedness of production processes in a vertical trading chain that stretches across many countries, with each country specializing in particular stages of a good’s production sequence. The purpose of the article is to form a theoretical and methodological basis for an economic retrospective of the development of the theory of vertical specialization. The subject of the research is theoretical and methodological aspects of the economic retrospective of the development of the theory of vertical specialization. Methods used in the study: historical method, methods of verification of theoretical positions (morphological analysis of the content and relationship of categories, principles and laws, assessment of the correspondence of historical facts to theoretical hypotheses), methods of analysis and synthesis, induction and deduction, logical method (hypothetical and axiomatic approaches), comparison method. Research hypothesis. In the context of global challenges, it is necessary to change the nature of interaction, for which it is necessary to form a theoretical and methodological basis for an economic retrospective of the development of the theory of vertical specialization. Presentation of the main material. Vertical specialization occurs when a country uses imported intermediate parts to produce goods that it later exports. This definition reflects the idea that countries are consistently linked to each other to produce the final good. The fulfillment of the conditions is justified: the product must be produced in several successive stages, two or more countries must specialize in the production of some, but not all, stages, and at least one stage must cross the international border more than once. It is emphasized that vertical specialization occurs when a country uses imported intermediate parts to produce goods that it later exports. Originality and practical significance of the research. The study of the economic retrospective of the development of the theory of vertical specialization includes four interrelated blocks – the theoretical and exploratory basis of interaction, the substantive (paradigmatic and methodological), applied and managerial basis of the interaction of business entities, which will allow comprehensively cover possible aspects of interaction. Conclusions of the study. The article examines the theoretical and methodological basis of vertical trade also connects the growth of international trade with an increase in international production. The forces that have driven increased vertical trade – lowering trade barriers and improving transport and communication technologies – are likely to persist. Thus, we can conclude that the value of VS and vertical trade in world trade will grow from year to year.