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Trade Openness and International Fragmentation of Production in the European Union: The New Divide?

Author

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  • Paolo Guerrieri
  • Filippo Vergara Caffarelli

Abstract

This paper analyses the relationship between international fragmentation of production, trade openness and global export performance in the European Union from 2000 to 2009. As most trade models featuring international production sharing show, the higher the level of fragmentation and related international openness the better the export performance of a country. Our econometric analysis confirms this hypothesis. We estimate an error correction model based on panel data on the EU Member States and find that inter-European fragmentation and openness significantly improve their long-run export performance. Policy implications could be that restrictive policies preventing firms from internationalizing production would weaken a country�s position in global production networks, with long-term negative effects on domestic jobs and growth.
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Suggested Citation

  • Paolo Guerrieri & Filippo Vergara Caffarelli, 2012. "Trade Openness and International Fragmentation of Production in the European Union: The New Divide?," Review of International Economics, Wiley Blackwell, vol. 20(3), pages 535-551, August.
    • Handle: RePEc:bla:reviec:v:20:y:2012:i:3:p:535-551
    DOI: j.1467-9396.2012.01037.x
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    File URL: http://hdl.handle.net/10.1111/j.1467-9396.2012.01037.x
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    Cited by:

    1. Fabio Ascione & Maria Enrica Virgillito, 2023. "Vertical integration and patterns of divergence in European industries: A long-term input-output analysis," LEM Papers Series 2023/25, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
    2. Luigi Bonatti & Andrea Fracasso, 2013. "The German Model and the European Crisis," Journal of Common Market Studies, Wiley Blackwell, vol. 51(6), pages 1023-1039, November.
    3. Jan Hagemejer & Joanna Tyrowicz, 2017. "Upstreamness of employment and global financial crisis in Poland: the role of position in the global value chains," GRAPE Working Papers 15, GRAPE Group for Research in Applied Economics.
    4. André Carrascal & Luis Orea, "undated". "TFP growth, embeddedness, and Covid-19: a novel production model that allows estimating trade elasticities," Working Papers 6, International Society for Efficiency and Productivity Analysis.
    5. Michael Landesmann & Sandra M. Leitner & Robert Stehrer, 2015. "Competitiveness of the European Economy," wiiw Research Reports 401, The Vienna Institute for International Economic Studies, wiiw.
    6. Rita Cappariello & Milan Damjanovic & Michele Mancini & Filippo Vergara Caffarelli, 2018. "EU-UK global value chain trade and the indirect costs of Brexit," Questioni di Economia e Finanza (Occasional Papers) 468, Bank of Italy, Economic Research and International Relations Area.
    7. Mădălina-Gabriela ANGHEL & Ștefan Virgil IACOB & Dragoș Alexandru HAȘEGAN, 2020. "The analysis of the international trade of Romania," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania / Editura Economica, vol. 0(1(622), S), pages 183-200, Spring.
    8. Tudorel Andrei & Bogdan Oancea & Andreea Mirică, 2022. "Agriculture export variety and the short and long run impact on agriculture export," Agricultural Economics, Czech Academy of Agricultural Sciences, vol. 68(4), pages 137-145.
    9. Keppel, Catherine & Prettner, Klaus, 2015. "How interdependent are Eastern European economies and the Euro area?," The Quarterly Review of Economics and Finance, Elsevier, vol. 58(C), pages 18-31.
    10. Ariodillah Hidayat & Bernadette Robiani & Taufiq Marwa & Suhel Suhel, 2023. "Competitiveness, Market Structure, and Energy Policies: A Case Study of the World s Largest Crude Palm Oil Exporter," International Journal of Energy Economics and Policy, Econjournals, vol. 13(3), pages 111-121, May.
    11. Magdalena Olczyk & Aleksandra Kordalska, 2017. "Gross Exports Versus Value-Added Exports: Determinants and Policy Implications for Manufacturing Sectors in Selected CEE Countries," Eastern European Economics, Taylor & Francis Journals, vol. 55(1), pages 91-109, January.
    12. Hansen Tandra & Arif Imam Suroso & Yusman Syaukat & Mukhamad Najib, 2022. "The Determinants of Competitiveness in Global Palm Oil Trade," Economies, MDPI, vol. 10(6), pages 1-20, June.
    13. Ines Buono & Filippo Vergara Caffarelli, 2013. "Trade elasticity and vertical specialisation," Temi di discussione (Economic working papers) 924, Bank of Italy, Economic Research and International Relations Area.

    More about this item

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production

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