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Global production sharing and trade effects: an analysis of Eurasian Economic Union

Author

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  • Sanjeev Vasudevan

    (Indian Institute of Technology Madras)

  • M. Suresh Babu

    (Indian Institute of Technology Madras)

Abstract

This study examines the trade effects of the Eurasian Economic Union on global production sharing. We use a panel dataset of bilateral exports of intermediate goods, parts and components and final assembly for 12 Eurasian countries with 28 partners for 2000–18. We estimate a gravity model using the Poisson Pseudo Maximum Likelihood method to mitigate zero trade values and heteroskedasticity issues. Our analysis provides new empirical evidence on significant net trade creation effects of 111% in intermediate goods exports due to EAEU formation. Our findings also highlight that a substantial share of the increase in intermediate goods exports originates from trade creation in final assembly exports while parts and components show net trade diversion effects. Further, a country-level analysis reveals that the trade effects of EAEU are heterogeneous across all the members, with Armenia and the Russian Federation benefiting the most and the Kyrgyz Republic benefiting the least from the EAEU formation. Our study has important policy implications on promoting production sharing in the Eurasian region and hence remains of interest to policymakers.

Suggested Citation

  • Sanjeev Vasudevan & M. Suresh Babu, 2021. "Global production sharing and trade effects: an analysis of Eurasian Economic Union," Eurasian Economic Review, Springer;Eurasia Business and Economics Society, vol. 11(4), pages 633-665, December.
    • Handle: RePEc:spr:eurase:v:11:y:2021:i:4:d:10.1007_s40822-021-00179-0
    DOI: 10.1007/s40822-021-00179-0
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    More about this item

    Keywords

    Eurasian economic union; Trade effects; Global production sharing; Parts and components trade; Gravity model; Poisson pseudo maximum likelihood;
    All these keywords.

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade

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