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Fragmentation and East Asia’s Information Technology Trade

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Author Info
Carl Bonham () (Department of Economics, University of Hawaii at Manoa)
Byron Gangnes () (Department of Economics, University of Hawaii at Manoa)
Ari Van Assche () (Department of Economics, University of California at Davis)

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Abstract

This paper 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 o 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 U.S. and the E.U., where 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 inflow.

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File URL: http://www.economics.hawaii.edu/research/workingpapers/WP_04-9.pdf
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File Function: First version, 2004
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Publisher Info
Paper provided by University of Hawaii at Manoa, Department of Economics in its series Working Papers with number 200409.

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Length: 28 pages
Date of creation: 2004
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Handle: RePEc:hai:wpaper:200409

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Related research
Keywords: fragmentation; information technology; FDI and trade; trade elasticities; panel data;

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Find related papers by JEL classification:
C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data
F14 - International Economics - - Trade - - - Country and Industry Studies of Trade
F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

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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.:
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  3. 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)
  4. Liu, Xiaohui & Burridge, Peter & Sinclair, P J N, 2002. "Relationships between Economic Growth, Foreign Direct Investment and Trade: Evidence from China," Applied Economics, Taylor and Francis Journals, vol. 34(11), pages 1433-40, July. [Downloadable!] (restricted)
  5. 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!]
  6. 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)
  7. Tamim Bayoumi, 1999. "Estimating Trade Equations from Aggregate Bilateral Data," IMF Working Papers 99/74, International Monetary Fund.
    Other versions:
  8. 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)
  9. 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!]
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  11. 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!]
  12. Haug, Alfred A., 1996. "Tests for cointegration a Monte Carlo comparison," Journal of Econometrics, Elsevier, vol. 71(1-2), pages 89-115. [Downloadable!] (restricted)
  13. 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)
    Other versions:
  14. 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)
  15. Goldstein, Morris & Khan, Mohsin S., 1985. "Income and price effects in foreign trade," Handbook of International Economics, in: R. W. Jones & P. B. Kenen (ed.), Handbook of International Economics, edition 1, volume 2, chapter 20, pages 1041-1105 Elsevier. [Downloadable!] (restricted)
  16. 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!]
  17. 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)
Full references

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!]
  3. Salotti, Simone, 2008. "Global imbalances and household savings: the role of wealth," MPRA Paper 17729, University Library of Munich, Germany, revised 2009. [Downloadable!]
  4. MOTOHASHI Kazuyuki & YUAN Yuan, 2009. "Technology Spillovers from Multinationals to Local Firms: Evidence from Automobile and Electronics Firms in China," Discussion papers 09005, Research Institute of Economy, Trade and Industry (RIETI). [Downloadable!]
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