GLOBALIZATION, TECHNOLOGY DISCREPANCY AND SPECIALIZATION

Abstract

This paper sets up a theoretical monopolistic competition model to analyze the impact of globalization on specialization with different endogenous sunk-costs technologies between countries. We prove that the factors affecting the relationship between globalization and specialization include the country-size effect and the technology-advantage effect. We show that, in the case of a country with a smaller endogenous sunk-cost technology advantage, if the country-size effect dominates the technology-advantage effect, then the number of the firms in monopolistic competition or the level of specialization will rise after trade, and vice versa.