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International fragmentation of production, trade and growth: Impacts and prospects for EU member states

Author

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  • Neil Foster
  • Robert Stehrer
  • Marcel Timmer

Abstract

There has been an ongoing trend towards increasing internationalisation of production over the past two decades or so. This implies that countries become more dependent on demand from foreign countries but also that countries and industries are able to source intermediates from different countries, an activity referred to as ‘offshoring’. Whereas the former aspect means an increasing dependency on foreign markets, the second aspect implies that countries and industries source at lower costs making them more productive and competitive. Using the World Input-Output Database (WIOD) we first provide an overview of these trends over the period 1995-2011 for 40 advanced and emerging countries with a specific focus on the EU as a whole and the individual EU member states. In the second part of the paper we show results from an econometric analysis to explain growth performance, focusing on the impacts of the increasing internationalisation of production.

Suggested Citation

  • Neil Foster & Robert Stehrer & Marcel Timmer, 2013. "International fragmentation of production, trade and growth: Impacts and prospects for EU member states," European Economy - Economic Papers 2008 - 2015 484, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
  • Handle: RePEc:euf:ecopap:0484
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    References listed on IDEAS

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    1. Pol Antras & Davin Chor & Thibault Fally & Russell Hillberry, 2012. "Measuring the Upstreamness of Production and Trade Flows," American Economic Review, American Economic Association, vol. 102(3), pages 412-416, May.
    2. Neil Foster-McGregor & Johannes Poeschl & Robert Stehrer, 2016. "Offshoring and the Elasticity of Labour Demand," Open Economies Review, Springer, vol. 27(3), pages 515-540, July.
    3. Ricardo Hausmann & Jason Hwang & Dani Rodrik, 2007. "What you export matters," Journal of Economic Growth, Springer, vol. 12(1), pages 1-25, March.
    4. Richard Baldwin, 2011. "Trade And Industrialisation After Globalisation's 2nd Unbundling: How Building And Joining A Supply Chain Are Different And Why It Matters," NBER Working Papers 17716, National Bureau of Economic Research, Inc.
    5. Miller,Ronald E. & Blair,Peter D., 2009. "Input-Output Analysis," Cambridge Books, Cambridge University Press, number 9780521517133, May.
    6. Miller,Ronald E. & Blair,Peter D., 2009. "Input-Output Analysis," Cambridge Books, Cambridge University Press, number 9780521739023, May.
    7. Erik Dietzenbacher & Bart Los & Robert Stehrer & Marcel Timmer & Gaaitzen de Vries, 2013. "The Construction Of World Input-Output Tables In The Wiod Project," Economic Systems Research, Taylor & Francis Journals, vol. 25(1), pages 71-98, March.
    8. 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.
    9. Robert Koopman & William Powers & Zhi Wang & Shang-Jin Wei, 2010. "Give Credit Where Credit Is Due: Tracing Value Added in Global Production Chains," NBER Working Papers 16426, National Bureau of Economic Research, Inc.
    10. Johnson, Robert C. & Noguera, Guillermo, 2012. "Accounting for intermediates: Production sharing and trade in value added," Journal of International Economics, Elsevier, vol. 86(2), pages 224-236.
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    Citations

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    Cited by:

    1. Commendatore, Pasquale & Kubin, Ingrid & Petraglia, Carmelo & Sushko, Iryna, 2014. "Regional integration, international liberalisation and the dynamics of industrial agglomeration," Journal of Economic Dynamics and Control, Elsevier, vol. 48(C), pages 265-287.
    2. Éltető, Andrea, 2014. "A visegrádi országok kereskedelme Ázsiával - a globális termelés lenyomata
      [The trade of the Visegrád countries with Asia - a manifestation of global production]
      ," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(5), pages 586-608.
    3. Piirainen, Kalle A. & Tanner, Anne Nygaard & Alkærsig, Lars, 2017. "Regional foresight and dynamics of smart specialization: A typology of regional diversification patterns," Technological Forecasting and Social Change, Elsevier, vol. 115(C), pages 289-300.
    4. Iulia Monica Oehler-Sincai, 2014. "Gauging The Vertical Specialization In Eu Trade," Global Economic Observer, "Nicolae Titulescu" University of Bucharest, Faculty of Economic Sciences;Institute for World Economy of the Romanian Academy, vol. 2(2), pages 130-139, November.
    5. Alberto Botta, 2014. "Structural asymmetries at the roots of the eurozone crisis: what's new for industrial policy in the EU?," PSL Quarterly Review, Economia civile, vol. 67(269), pages 169-216.

    More about this item

    JEL classification:

    • E20 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)
    • F15 - International Economics - - Trade - - - Economic Integration
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • F62 - International Economics - - Economic Impacts of Globalization - - - Macroeconomic Impacts

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