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Cambridge Journal of Economics Advance Access originally published online on November 29, 2005
Cambridge Journal of Economics 2006 30(4):507-520; doi:10.1093/cje/bei095
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Right arrow F02 - International Economic Order
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© The Author 2005. Published by Oxford University Press on behalf of the Cambridge Political Economy Society. All rights reserved.

Article

Low-wage manufacturing and global commodity chains: a model in the unequal exchange tradition

James Heintz*

* University of Massachusetts

Address for correspondence: Political Economy Research Institute, University of Massachusetts, 418 N. Pleasant Street, Suite A, Amherst, MA 01002, USA; email: jheintz{at}peri.umass.edu

Abstract

The institutional setting of subcontracted manufacturing has a profound impact on how the benefits of trade are distributed. This paper develops a model that combines insights from unequal exchange theorists and global commodity chain analysis to clarify the distributive dynamics of production networks in which subcontracting and branding are defining features. In this framework, the ability of productivity growth to increase income from exports is constrained and depends on how the benefits of productivity improvements are captured—as lower consumer prices or higher rents for brand-name multinationals. Increasing consumption in affluent consumer markets raises export earnings. However, developing countries, acting alone, are constrained in their ability to affect the demand side of global commodity chains. Instead, supply-side policies to support industrial upgrading represent a more viable option for raising incomes.

Key Words: Trade • Global commodity chains • Subcontracting • Branding

JEL classifications: F02, F23, O19

Manuscript received February 20, 2004; final version received February 28, 2005.


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