New international division of labour

In economics, the new international division of labor (NIDL) is an outcome of globalization. The term was coined by theorists seeking to explain the spatial shift of manufacturing industries from advanced capitalist countries to developing countries—an ongoing geographic reorganization of production, which finds its origins in ideas about a global division of labor. It is a spatial division of labor which occurs when the process of production is no longer confined to national economies. Under the “old” international division of labor, until around 1970, underdeveloped areas were incorporated into the world economy principally as suppliers of minerals and agricultural commodities. However, as developing economies are merged into the world economy, more production takes place in these economies.

This has led to a trend of transference, or what is also known as the "global industrial shift", in which production processes are relocated from developed countries (the USA, Europe and Japan) to developing countries in Asia (for example China, Vietnam and India) and Latin America. This is because companies search for the cheapest locations to manufacture and assemble components, so low-cost labor-intensive parts of the manufacturing process are shifted to the developing world where costs are substantially lower. Companies do so by taking advantage of transportation and communications technology, as well as fragmentation and locational flexibility of production. From 1953 to the late 1990s, the industrialized economies' share of world manufacturing output declined from 95% to 77%, and the developing economies’ share more than quadrupled from 5% to 23%.

World map showing countries above and below the median 2010 GDP (PPP) per capita, US$10,700. Source: IMF (International Monetary Fund).
Blue above world GDP (PPP) per capita
Orange below world GDP (PPP) per capita

The resultant division of labor across continents closely follows the North–South socio-economic and political divide wherein the North—with one quarter of the world population—controls four fifths of the world income while the South—with three quarters of the world populations—has access to one fifth of the world income.

See also

• Global workforce
• Globalization
• International relations
• South-South cooperation