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Production Fragmentation and Factor Price Convergence

Author

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  • Hulya Saygili

Abstract

In this analysis, we empirically analyze if the nature of trade matters for international factor price convergence. In particular, we examine whether factor prices converge when country pairs involve with more bilateral production fragmentation arrangements. We apply panel fixed effect techniques using data for five EU countries. The analyses are controlled for alternative trade related indicators such as bilateral trade intensity and bilateral intra-industry trade as well as for industrial similarity variables. We find that bilateral production fragmentation plays a key role in labor cost converging effects of trade.

Suggested Citation

  • Hulya Saygili, 2017. "Production Fragmentation and Factor Price Convergence," Working Papers 1718, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
    • Handle: RePEc:tcb:wpaper:1718
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    File URL: https://www.tcmb.gov.tr/wps/wcm/connect/EN/TCMB+EN/Main+Menu/Publications/Research/Working+Paperss/2017/17-18
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    Cited by:

    1. Agnieszka Głodowska & Bożena Pera, 2019. "On the Relationship between Economic Integration, Business Environment and Real Convergence: The Experience of the CEE Countries," Economies, MDPI, vol. 7(2), pages 1-19, June.

    More about this item

    Keywords

    International factor price convergence; Production fragmentation; Trade;
    All these keywords.

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F15 - International Economics - - Trade - - - Economic Integration
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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