very specific and particular products, firms in certain countries develop unique and different skills.

Specialization in the world economy can be very finely split. In fact, recent years have seen a trend in

international trade, which economists call splitting up the value chain. The value chain describes how a good

is produced in stages. As indicated in the beginning of the chapter, producing the iPhone involves designing

and engineering the phone in the United States, supplying parts from Korea, assembling the parts in China,

and advertising and marketing in the United States. Thanks in large part to improvements in communication

technology, sharing information, and transportation, it has become easier to split up the value chain. Instead

of production in a single large factory, different firms operating in various places and even different countries
can divide the value chain. Because firms split up the value chain, international trade often does not involve
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