Implications Of Specialization And Specialization

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Specialization has been firstly established by Adam Smith theory, the absolute advantage. It is a method of production where a business focuses on one limited scope of products or services in order to gain productive efficiency within the entire system of businesses. Many countries, for instance, specialize in producing the goods and services that are native to their part of the world. On the other hand, incomplete specialization still exists with the modern theory, a result of the pure theory of international trade based on two-factors, two-goods Heckscher-Ohlin models. There are factors that make the specialization imperfect in practice; such as, endogenous growth, transportation cost, immobility, and interdependency. In 1994, Klaus Walde Economic interdependence has become a main complex issue in recent times, often resulting in strong and uneven impacts among nations and within a given nation. Economic interdependence is a consequence of specialization. Whitman, cited by Baldwin, further expands and proposes that economic interdependence should also involve the degree of sensitivity of a country’s economic behavior to policies and development of countries outside its border. However, empirical evidence to support the latter definition is a lot harder to find, given its ambiguity. Even though specialization will give comparative advantage, which is the ability of a firm or individual to produce goods or services at a lower opportunity cost than other firms or individuals, economic interdependence will scare some countries to specialize in something and dependently import something else from the other countries. In conclusion, interdependence will contribute imperfect specialization in international trade. These factors are clearly represented the factors that cause incomplete specialization. There are so many researches supporting these factors as this essay has discussed. Furthermore, the example can be found recently between countries. However, the factors that contribute to imperfect specialization in international trade in this essay are only majorities. There are many minor factors that might not been found or they might be too complicated to proof. Some factors might relate to the other factors, which impossible to be extracted from each

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