This paper develops an elementary theory of global supply chains. In spite of its simplicity, our theory is consistent with a number of stylized facts and able to deliver a rich set of predictions regarding how vertical specialization shapes the interdependence of nations. Among other things,...

Capital equipment, such as computers and industrial machinery, embodies skill-biased technology and, hence, is complementary to skilled labor. Many countries, by importing a large share of their capital, import skill-biased technology and a rise in the skill premium. In this paper we develop a...