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Multi Country Vertical Specialization Dependence:
A New Approach to the Vertical Specialization study

Nagendra Shrestha

March, 2007

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Abstract

This paper attempts to reveal the vertical specialization dependence relationship in East Asian countries using the multi country vertical specialization dependence modeling based on the Asian International Input-Output data. Use of multi country model allows us to study the country-wise vertical specialization association that is not possible with the single country model. More over, the multi country vertical specialization dependence modeling, a new approach to study the vertical specialization (imported intermediate goods to produce the export goods), enables us to explain the dependence on domestic intermediate goods and the dependence on other countries as well. The results show that the vertical specialization dependence on total import and group of USA, EU and ROW is high in general among the East Asian countries. However, it is also important to note that the vertical specialization dependence on 9 Asian countries and Hong Kong is relatively high as compared to non-regional countries. Such a situation of vertical specialization dependence in East Asia indicates the strong relationship (in terms of vertical specialization) among the Asian countries.

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