Specialisation in production
Topic: International Trade: Patterns, Ports and the WTO · NCERT: Class 12, Ch 8 "International Trade"
Meaning
Specialisation in production means a country or region focuses on the goods or services it is best suited to make. It then trades its extra output for the things it does not make. International trade comes from this specialisation and from the division of labour among nations, where different countries do different jobs. Because each place does what it does best, the world produces more in total, and the world economy gains.
Example
India has many trained software workers, so it specialises in IT services. Firms in cities such as Bengaluru export these services to the USA and import goods that India makes less well.
Don't confuse with
- Comparative advantage: this is Ricardo's (1817) reason for choosing what to specialise in. It is the good with the lowest opportunity cost, meaning the least given up to make it. Specialisation is the act of focusing on that good.