In O Level Unit 3, we have already looked into division of labour and specialisation at individual level. For individuals, specialisation means each individual takes up a special task of production and he becomes special to that task. Read the tutorial about specialisation at individual level for more details.
Certain regions have specialised in certain industrial production e.g. coal mining in Yorkshire, pottery in Stoke. In Maldives, R.Alifushi is specialised in local boats construction and carpentry.
Advantages of Specialisation at Regional Level
- efficient use of resources – A region could specialise in a particular industry due to availability of resources. Therefore it will be easier to use that resource efficiently
- Creates jobs to residents – When an industry develops in a particular region, it helps the residents of that area since they can find work nearby their homes
- Infrastructure development – When a region is specialised in a particular industry, infrastructure will be built to support that industry, therefore, it develops the region.
Disadvantages of Specialisation at Regional Level
- Risk of low demand – Even though specialisation increases output, its benefits will not be achieved if there is no matching demand.
- Rising costs – Costs will increase if labour and raw materials have to be transported from other regions
Certain countries have advantages in producing certain goods. They may have natural resources or they may be able to produce goods more cheaply.
e.g. Sri Lanka Tea, Japan electronics. They then trade these goods for those produced in other countries.
Advantages of specialisation at national level
- Economies of scale and efficiency – Just like specialisation by individuals, countries can specialise in what they do best, and this leads to efficiency and economies of scale. It can therefore increase output of the country. When more and more countries specialise, it increases world output.
- Job creation – Specialisation leads to increased output and therefore it could lead to more investment and thus jobs are created as the output increases. Moreover, it requires skilled labour and thus earnings are higher.
- National level specialisation allows more international trade to take place and therefore more goods that other countries produce can be imported as well. Therefore it increases choice for the people of the country
- Revenue to the government – As income increases, and as more trade takes place, it gives the possibility for the government to increase the revenue.
- Improves standard of living – increased choice for the consumers, increased income, increased output, increased infrastructure means a better quality of life for the people, therefore standard of living will improve
Disadvantages of specialisation at national levels
- Danger of unemployment – Even though national level specialisation usually creates more jobs, there is a risk of certain types of structural unemployment to occur. As the country moves towards specialisation, the workers in the declining industries may not find suitable work for them
- Over-exploitation of resources – output maybe increased by over-exploiting resources. In this case todays output is increased at the cost of the future generations.
- Negative externalities/ social cost – There could be external costs like damage to the environment which is a matter of concern