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Deep integration and production networks: an empirical analysis

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  • Gianluca OREFICE

    ()

  • Nadia ROCHA

    ()

Abstract

In this paper, the two way relationship between deep integration and production networks trade is investigated. Deep integration is captured by a set of indices constructed in terms of policy areas covered in preferential trade agreements. An augmented gravity equation is estimated to investigate the impact of deep integration on production networks. The results show that on average, signing deeper agreements increases production networks trade between member countries by almost 35 percentage points. In addition, the impact of deep integration is higher for trade in automobile parts and information and technology products compared with textiles products. To analyse whether higher levels of network trade increase the likelihood of signing deeper agreements the literature on the determinants of preferential trade agreements is followed. The estimation results show that, after taking into account other PTAs determinants, a ten per cent increase in the share of production network trade over total trade increases the depth of an agreement by approximately 6 percentage points. In addition, the probability of signing deeper agreements is higher for country pairs involved in North-South production sharing and for countries belonging to the Asia region.

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Bibliographic Info

Paper provided by Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano in its series Departmental Working Papers with number 2011-24.

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Date of creation: 04 Nov 2011
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Handle: RePEc:mil:wpdepa:2011-24

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Related research

Keywords: Regionalism; deep integration; production networks;

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Cited by:
  1. Gianluca Orefice, 2013. "International Migration and Trade Agreements: the new role of PTAs," FIW Working Paper series 111, FIW.
  2. Richard Pomfret, 2012. "The Post-2007 Crises and Europe's Place in the Global Economy," CASE Network Studies and Analyses 439, CASE-Center for Social and Economic Research.
  3. Rahul Sen & Sadhana Srivastava, 2011. "Integrating into Asia’s international production networks: Challenges and prospects for India," STUDIES IN TRADE AND INVESTMENT, in: India: A New Player in Asian Production Networks?, Studies in Trade and Investment 75, chapter 4, pages 78-119 United Nations Economic and Social Commission for Asia and the Pacific (ESCAP).
  4. Rahul Sen & Sadhana Srivastava, 2012. "Asia' s international production networks: Will India be the next assembly centre?," Working Papers 11812, Asia-Pacific Research and Training Network on Trade (ARTNeT), an initiative of UNESCAP and IDRC, Canada..
  5. Robert C. Johnson & Guillermo Noguera, 2012. "Fragmentation and Trade in Value Added over Four Decades," NBER Working Papers 18186, National Bureau of Economic Research, Inc.
  6. Jayant Menon, 2013. "Can FTAs Support the Growth or Spread of International Production Networks in Asia?," Departmental Working Papers 2013-06, The Australian National University, Arndt-Corden Department of Economics.

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