Trade openness and international fragmentation of production in the European Union: the new divide?
AbstractThis paper analyses the relationship between international fragmentation of production, trade openness and global export performance in the European Union from 2000 to 2009. As most trade models featuring international production sharing show, the higher the level of fragmentation and related international openness the better the export performance of a country. Our econometric analysis confirms this hypothesis. We estimate an error correction model based on panel data on the EU Member States and find that inter-European fragmentation and openness significantly improve their long-run export performance. Policy implications could be that restrictive policies preventing firms from internationalizing production would weaken a country’s position in global production networks, with long-term negative effects on domestic jobs and growth.
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Bibliographic InfoPaper provided by Bank of Italy, Economic Research and International Relations Area in its series Temi di discussione (Economic working papers) with number 855.
Date of creation: Feb 2012
Date of revision:
international fragmentation of production; trade openness; export performance; European Union;
Other versions of this item:
- Paolo Guerrieri & Filippo Vergara Caffarelli, 2012. "Trade Openness and International Fragmentation of Production in the European Union: The New Divide?," Review of International Economics, Wiley Blackwell, vol. 20(3), pages 535-551, 08.
- F14 - International Economics - - Trade - - - Empirical Studies of Trade
- L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-03-21 (All new papers)
- NEP-EEC-2012-03-21 (European Economics)
- NEP-INT-2012-03-21 (International Trade)
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