Export specialization and the switching of global value chains

The essay explores the construction of global value chains through the insights provided by Pasinetti on international economic relations. By conceptualizing transnational supply chains as vertically integrated international subsystems, we can illustrate the cost-minimization problems faced by multinational companies through a process of rectangular choice of techniques within multi-regional input–output systems. This theoretical framework suggests that, contrary to conventional wisdom, international trade flows are primarily determined by competitive price positions, which, in turn, influence the techniques of production brought into use within an economy, rather than the reverse. The analysis employs linear programming methods to examine the institutional and technical changes that drive the cyclical restructuring of supply chains and their differential impacts on both central and peripheral economies. The essay concludes with economic policy considerations that address the implications of these findings for effective governance and strategic planning in the context of global value chains.