International production sharing and economic development: moving up the value-chain for a small-open economy

Abstract

This study theoretically examines the factors required by a small-open economy to move up the value-chain. To carry out the study, a framework of production sharing involving a large developed country and a less developed small-open economy is used. Service bundles are modelled as inputs for coordinating the manufacturing activities located across the countries. It is found that the small-open economy can move up the value-chain when the size of its skilled labour force increases and the production cost of its service bundles decreases.

Acknowledgements

The paper is based on the author's unpublished thesis entitled ‘Production and service fragmentation: Implications from a theoretical model’ (National University of Singapore). I thank my adviser Dr Ho Kong Weng for invaluable insights on the improvement of my model. All remaining errors are mine.