Trade in parts and components and Central Eastern European Countries’ industrial geography
AbstractGrowing inflows of FDI and the increasing integration of domestic firms into International Production Networks (IPNs) set up by EU-15 principals have yielded a rise in trade in parts and components for Central Eastern European Countries (CEECs). As a consequence, new patterns of localisation of industrial activities have been observed in the region since mid-1990s. In this paper, I propose a comprehensive model of trade and production which tries to explain cross-country variations of sectoral output on the basis of both comparative advantages (Ricardo, Heckscher-Ohlin) and agglomeration forces (home market effect, market potential), and singles out the role played by trade in middle products. The empirical implementation, on a panel of the four sectors where the largest share of CEECs’ trade in intermediates with EU-15 is concentrated, reveals that the higher is the involvement in IPNs the larger is the domestic share of regional output. Comparative advantages are a crucial determinant of localisation as opposite to the negligible role played by possible magnification effects due to domestic demand and market potential. I argue that results can be interpreted as an assessment of the predictive power of two alternative trade theories
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Bibliographic InfoPaper provided by Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano in its series Departmental Working Papers with number 2007-17.
Date of creation: 10 May 2007
Date of revision:
Trade in Parts and Components; Fragmentation of Production; Industry Localisation; Comparative Advantages; New Trade Theory; Economic Geography;
Find related papers by JEL classification:
- F10 - International Economics - - Trade - - - General
- F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies
- F14 - International Economics - - Trade - - - Empirical Studies of Trade
- F15 - International Economics - - Trade - - - Economic Integration
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- Elżbieta Kawecka-Wyrzykowska, 2009. "Evolving pattern of intra-industry trade specialization of the new Member States (NMS) of the EU: the case of automotive industry," European Economy - Economic Papers 364, Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission.
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