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Fragmentation and East Asia's information technology trade

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Author Info
Carl S. Bonham
Byron Gangnes
Ari Van Assche

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Abstract

This article studies the growth and determinants of information technology (IT) trade in the Asia-Pacific region. We argue that the rise of IT trade must be understood within the context of increasing vertical fragmentation of production processes that has occurred over the past two decades. To evaluate this empirically, we estimate a set of pooled bilateral IT export equations for eight Asian countries, the USA and the EU, where foreign direct investment (FDI) inflows are introduced as a proxy for fragmentation. We apply a panel cointegration approach that allows for heterogeneity in short-run dynamics and in fixed effects. Consistent with production fragmentation, we find that the evolution of IT trade can be explained in part by traditional income and relative price effects but also by FDI inflows.

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Publisher Info
Article provided by Taylor and Francis Journals in its journal Applied Economics.

Volume (Year): 39 (2007)
Issue (Month): 2 (February)
Pages: 215-228
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Handle: RePEc:taf:applec:v:39:y:2007:i:2:p:215-228

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. David Hummels & Dana Rapoport & Kei-Mu Yi, 1998. "Vertical specialization and the changing nature of world trade," Economic Policy Review, Federal Reserve Bank of New York, issue Jun, pages 79-99. [Downloadable!]
  2. Haug, Alfred A., 1993. "Residual based tests for cointegration : A Monte Carlo study of size distortions," Economics Letters, Elsevier, vol. 41(4), pages 345-351. [Downloadable!] (restricted)
  3. Dieter Ernst, 2002. "Global Production Networks in East Asia's Electronics Industry and Upgrading Perspectives in Malaysia," Economics Study Area Working Papers wp44, East-West Center, Economics Study Area, revised Oct 2003. [Downloadable!]
  4. Stock, James H, 1987. "Asymptotic Properties of Least Squares Estimators of Cointegrating Vectors," Econometrica, Econometric Society, vol. 55(5), pages 1035-56, September. [Downloadable!] (restricted)
  5. Tamim Bayoumi, 1999. "Estimating Trade Equations from Aggregate Bilateral Data," IMF Working Papers 99/74, International Monetary Fund.
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  6. Pedroni, Peter, 1999. " Critical Values for Cointegration Tests in Heterogeneous Panels with Multiple Regressors," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 61(0), pages 653-70, Special I. [Downloadable!] (restricted)
  7. Dieter Ernst & Paolo Guerrieri, 1997. "International Production Networks And Changing Trade Patterns In East Asia: The Case Of The Electronics Industry," DRUID Working Papers 97-7, DRUID, Copenhagen Business School, Department of Industrial Economics and Strategy/Aalborg University, Department of Business Studies. [Downloadable!]
  8. Head, Keith & Ries, John, 2001. "Overseas Investment and Firm Exports," Review of International Economics, Blackwell Publishing, vol. 9(1), pages 108-22, February. [Downloadable!] (restricted)
  9. Joseph E. Gagnon, 2003. "Long-run supply effects and the elasticities approach to trade," International Finance Discussion Papers 754, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
  10. Haug, Alfred A., 1996. "Tests for cointegration a Monte Carlo comparison," Journal of Econometrics, Elsevier, vol. 71(1-2), pages 89-115. [Downloadable!] (restricted)
  11. Jonathan Eaton & Akiko Tamura, 1995. "Bilateralism and Regionalism in Japanese and U.S. Trade and Direct Foreign Investment Patterns," NBER Working Papers 4758, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  12. Phillips, Peter C B & Hansen, Bruce E, 1990. "Statistical Inference in Instrumental Variables Regression with I(1) Processes," Review of Economic Studies, Blackwell Publishing, vol. 57(1), pages 99-125, January. [Downloadable!] (restricted)
  13. Peter C.B. Phillips & Bruce E. Hansen, 1988. "Statistical Inference in Instrumental Variables," Cowles Foundation Discussion Papers 869R, Cowles Foundation, Yale University, revised Apr 1989. [Downloadable!]
  14. Helpman, Elhanan, 1984. "A Simple Theory of International Trade with Multinational Corporations," Journal of Political Economy, University of Chicago Press, vol. 92(3), pages 451-71, June. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Ari Van Assche & Byron Gangnes, 2007. "Electronics Production Upgrading: Is China Exceptional?," CIRANO Working Papers 2007s-16, CIRANO. [Downloadable!]
    Other versions:
  2. Ari Van Assche, 2006. "Modularity and the Organization of International Production," CIRANO Working Papers 2006s-09, CIRANO. [Downloadable!]
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