Advanced Search
MyIDEAS: Login

Incomplete Specialization and Trade in Parts and Components

Contents:

Author Info

  • Richard Frensch

    ()

  • Jan Hanousek

    ()

  • Evžen Kočenda

    ()

Abstract

Within a higher-dimensional incomplete specialization Heckscher-Ohlin framework, we first develop a gravity model that views bilateral gravity equations as statistical relationships constrained on countries’ multilateral specialization patterns. Second, we test our model empirically by using a uniquely detailed and large European data set. We show that trade in the parts and components of capital goods is driven by supply-side country differences relative to the rest of the world, compatible with models of incomplete specialization and trade. We take our results as evidence of the existence of international production networks in Europe, driven by trade-offs between wages and coordination costs.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.wdi.umich.edu/files/Publications/WorkingPapers/wp1044.pdf
Download Restriction: no

Bibliographic Info

Paper provided by William Davidson Institute at the University of Michigan in its series William Davidson Institute Working Papers Series with number wp1044.

as in new window
Length: pages
Date of creation: 15 Mar 2013
Date of revision:
Handle: RePEc:wdi:papers:2013-1044

Contact details of provider:
Postal: 724 E. University Ave, Wyly Hall 1st Flr, Ann Arbor MI 48109
Phone: 734 763-5020
Fax: 734 763 5850
Email:
Web page: http://www.wdi.umich.edu
More information through EDIRC

Related research

Keywords: International trade; gravity model; offshoring; panel data; European Union;

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

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.:
as in new window
  1. Wilhelm Kohler, 2004. "Aspects of International Fragmentation," Review of International Economics, Wiley Blackwell, vol. 12(5), pages 793-816, November.
  2. Arellano, Manuel & Bond, Stephen, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Wiley Blackwell, vol. 58(2), pages 277-97, April.
  3. Helpman, Elhanan, 1987. "Imperfect competition and international trade: Evidence from fourteen industrial countries," Journal of the Japanese and International Economies, Elsevier, vol. 1(1), pages 62-81, March.
  4. Marin, Dalia, 2006. "A new international division of labor in Europe: Outsourcing and offshoring to Eastern Europe," Munich Reprints in Economics 19229, University of Munich, Department of Economics.
  5. Kazunobu Hayakawa, 2007. "Measuring Barriers to International Division of Labor in East Asia ," Asian Economic Journal, East Asian Economic Association, vol. 21(2), pages 139-153, 06.
  6. James E. Anderson & Eric van Wincoop, 2003. "Gravity with Gravitas: A Solution to the Border Puzzle," American Economic Review, American Economic Association, vol. 93(1), pages 170-192, March.
  7. Bergstrand, Jeffrey H, 1989. "The Generalized Gravity Equation, Monopolistic Competition, and the Factor-Proportions Theory in International Trade," The Review of Economics and Statistics, MIT Press, vol. 71(1), pages 143-53, February.
  8. Ingo Geishecker & Holger Görg, 2008. "Winners and losers: a micro-level analysis of international outsourcing and wages," Canadian Journal of Economics, Canadian Economics Association, vol. 41(1), pages 243-270, February.
  9. Paul Romer, 1989. "Endogenous Technological Change," NBER Working Papers 3210, National Bureau of Economic Research, Inc.
  10. Hummels, David & Ishii, Jun & Yi, Kei-Mu, 2001. "The nature and growth of vertical specialization in world trade," Journal of International Economics, Elsevier, vol. 54(1), pages 75-96, June.
  11. Fukunari Kimura & Kazunobu Hayakawa & Zheng Ji, 2008. "Does International Fragmentation Occur in Sectors Other Than Machinery? ," Asian Economic Journal, East Asian Economic Association, vol. 22(4), pages 343-358, December.
  12. Deardorff, A.V., 1998. "Fragmentation in Simple Trade Models," Papers 98-11, Michigan - Center for Research on Economic & Social Theory.
  13. Costas Arkolakis & Arnaud Costinot & Andrés Rodríguez-Clare, 2009. "New Trade Models, Same Old Gains?," NBER Working Papers 15628, National Bureau of Economic Research, Inc.
  14. I-Hui Cheng & Howard J. Wall, 2005. "Controlling for heterogeneity in gravity models of trade and integration," Review, Federal Reserve Bank of St. Louis, issue Jan, pages 49-63.
  15. Richard Frensch, 2009. "Trade Liberalisation and Import Margins," FIW Working Paper series 039, FIW.
  16. Koopman, Robert & Wang, Zhi & Wei, Shang-Jin, 2012. "Tracing Value-Added and Double Counting in Gross Exports," CEPR Discussion Papers 9245, C.E.P.R. Discussion Papers.
  17. Simon J. Evenett & Wolfgang Keller, 1996. "On Theories Explaining the Success of the Gravity Equation," International Trade 9608001, EconWPA, revised 13 Jun 1997.
  18. Elhanan Helpman & Marc Melitz & Yona Rubinstein, 2008. "Estimating Trade Flows: Trading Partners and Trading Volumes," The Quarterly Journal of Economics, MIT Press, vol. 123(2), pages 441-487, 05.
  19. Emanuele Breda & Rita Cappariello & Roberta Zizza, 2007. "Vertical Specialisation in Europe: Evidence from the Import Content of Exports," Rivista di Politica Economica, SIPI Spa, vol. 97(3), pages 189, May-June.
  20. M Arellano & O Bover, 1990. "Another Look at the Instrumental Variable Estimation of Error-Components Models," CEP Discussion Papers dp0007, Centre for Economic Performance, LSE.
  21. Egger, Hartmut & Falkinger, Josef, 2003. "The distributional effects of international outsourcing in a 2 x 2 production model," The North American Journal of Economics and Finance, Elsevier, vol. 14(2), pages 189-206, August.
  22. FUJITA, Masahisa & THISSE, Jacques, 2003. "Globalization and the evolution of the supply chain: who gains and who loses ?," CORE Discussion Papers 2003074, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  23. Salvatore Baldone & Fabio Sdogati & Lucia Tajoli, 2001. "Patterns and determinants of international fragmentation of production: Evidence from outward processing trade between the EU and Central Eastern European countries," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 137(1), pages 80-104, March.
  24. Richard Frensch & Vitalija Gaucaite-Wittich, 2006. "Product variety and technical change," Working Papers 265, Institut für Ost- und Südosteuropaforschung (Institute for East and South-East European Studies).
  25. Thomas Chaney, 2008. "Distorted Gravity: The Intensive and Extensive Margins of International Trade," American Economic Review, American Economic Association, vol. 98(4), pages 1707-21, September.
  26. Debaere, Peter & Demiroglu, Ufuk, 2003. "On the similarity of country endowments," Journal of International Economics, Elsevier, vol. 59(1), pages 101-136, January.
  27. Arnaud Costinot & Jonathan Vogel & Su Wang, 2013. "An Elementary Theory of Global Supply Chains," Review of Economic Studies, Oxford University Press, vol. 80(1), pages 109-144.
  28. Amiti, Mary, 2005. "Location of vertically linked industries: agglomeration versus comparative advantage," European Economic Review, Elsevier, vol. 49(4), pages 809-832, May.
  29. Arndt, Sven W., 1997. "Globalization and the open economy," The North American Journal of Economics and Finance, Elsevier, vol. 8(1), pages 71-79.
  30. Keller, Wolfgang, 2002. "International Technology Diffusion," CEPR Discussion Papers 3133, C.E.P.R. Discussion Papers.
  31. 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.
  32. Jarko Fidrmuc, 2009. "Gravity models in integrated panels," Empirical Economics, Springer, vol. 37(2), pages 435-446, October.
  33. Jon Haveman & David Hummels, 2004. "Alternative hypotheses and the volume of trade: the gravity equation and the extent of specialization," Canadian Journal of Economics, Canadian Economics Association, vol. 37(1), pages 199-218, February.
  34. Deardorff, Alan V., 1979. "Weak links in the chain of comparative advantage," Journal of International Economics, Elsevier, vol. 9(2), pages 197-209, May.
  35. Gene M. Grossman & Esteban Rossi-Hansberg, 2008. "Trading Tasks: A Simple Theory of Offshoring," American Economic Review, American Economic Association, vol. 98(5), pages 1978-97, December.
  36. Andrei A. Levchenko, 2007. "Institutional Quality and International Trade," Review of Economic Studies, Oxford University Press, vol. 74(3), pages 791-819.
  37. Robert-Nicoud, Frédéric, 2008. "Offshoring of routine tasks and (de)industrialisation: Threat or opportunity--And for whom?," Journal of Urban Economics, Elsevier, vol. 63(2), pages 517-535, March.
  38. Chen, Natalie & Novy, Dennis, 2011. "Gravity, trade integration, and heterogeneity across industries," Journal of International Economics, Elsevier, vol. 85(2), pages 206-221.
  39. Krugman, Paul, 1980. "Scale Economies, Product Differentiation, and the Pattern of Trade," American Economic Review, American Economic Association, vol. 70(5), pages 950-59, December.
  40. Hartmut Egger & Peter Egger, 2005. "The Determinants of EU Processing Trade," The World Economy, Wiley Blackwell, vol. 28(2), pages 147-168, 02.
  41. Jonathan Eaton & Samuel Kortum, 2002. "Technology, Geography, and Trade," Econometrica, Econometric Society, vol. 70(5), pages 1741-1779, September.
  42. Egger, Hartmut & Falkinger, Josef, 2006. "The role of public infrastructure and subsidies for firm location and international outsourcing," European Economic Review, Elsevier, vol. 50(8), pages 1993-2015, November.
  43. Debeare, Peter, 2003. "Relative Factor Abundance and Trade," Journal of Political Economy, University of Chicago Press, vol. 111(3), pages 589-610, June.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Jan Hanousek & Evžen Kočenda, 2013. "Factors of trade in Europe," Working Papers 333, Institut für Ost- und Südosteuropaforschung (Institute for East and South-East European Studies).

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:wdi:papers:2013-1044. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Laurie Gendron).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.