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Trade in parts and components across Europe

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  • Frensch, Richard
  • Hanousek, Jan
  • KoÄ enda, Evžen

Abstract

Using the factor-proportion based gravity framework we identify driving forces for trade in parts and components. We test our model empirically by using a detailed and large data set of European trade in parts and components of capital goods and show that such trade between East and West Europe is driven by relative supply-side country differences, compatible with models of incomplete specialization and trade. We take our results as evidence for the existence of international East-West production networks in Europe, driven by trade-offs between wages and coordination costs. Our results also reveal that in response to stronger relative wage differences trade in parts and components across Europe is predominantly realized along the extensive margin.

Suggested Citation

  • Frensch, Richard & Hanousek, Jan & KoÄ enda, Evžen, 2015. "Trade in parts and components across Europe," CEPR Discussion Papers 10932, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:10932
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    Cited by:

    1. Jan Hanousek & Evzen Kocenda & Pavla Vozarova, 2017. "Productivity and Trade Spillovers: Horizontal Crowding-Out Versus Vertical Synergies in Europe as a Response to Foreign Direct Investment," CERGE-EI Working Papers wp601, The Center for Economic Research and Graduate Education - Economics Institute, Prague.
    2. Jan Hanousek & Evžen Kočenda, 2017. "Dopady vlastnické struktury, firemních charakteristik a krize na efektivitu českých podniků [Impact of Ownership Type, Firm Characteristics and Crisis on Efficiency of the Czech Firms]," Politická ekonomie, Prague University of Economics and Business, vol. 2017(1), pages 3-25.
    3. Jan Hanousek & Evzen Kocenda, 2016. "FDI and Ownership in Czech Firms: Pre- and Post-crisis Efficiency," KIER Working Papers 942, Kyoto University, Institute of Economic Research.
    4. Baumöhl, Eduard & Iwasaki, Ichiro & Kočenda, Evžen, 2020. "Firm survival in new EU member states," Economic Systems, Elsevier, vol. 44(1).
    5. Cutrini, Eleonora, 2019. "Economic integration, structural change, and uneven development in the European Union," Structural Change and Economic Dynamics, Elsevier, vol. 50(C), pages 102-113.

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    More about this item

    Keywords

    European union; Gravity model; International trade; Panel data; Production networks;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

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