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

The institutional setting of subcontracted manufacturing hasa profound impact on how the benefits of trade are distributed.This paper develops a model that combines insights from unequalexchange theorists and global commodity chain analysis to clarifythe distributive dynamics of production networks in which subcontractingand branding are defining features. In this framework, the abilityof productivity growth to increase income from exports is constrainedand depends on how the benefits of productivity improvementsare captured—as lower consumer prices or higher rentsfor brand-name multinationals. Increasing consumption in affluentconsumer markets raises export earnings. However, developingcountries, acting alone, are constrained in their ability toaffect the demand side of global commodity chains. Instead,supply-side policies to support industrial upgrading representa more viable option for raising incomes.