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Made in Europe? Trends in International Production Fragmentation

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  • Los, Bart
  • Timmer, Marcel
  • Vries, Gaaitzen J. de

    (Groningen University)

Abstract

In a world dominated by the emergence of global value chains, production processes increasingly fragment across a variety of countries. We provide new macro-economic evidence on this phenomenon, using a Theil-type distribution index of value added, which we call the international production fragmentation (IPF) index. In contrast to the well-known Feenstra and Hanson (1999) measure, this novel index does not suffer from a country size-bias and double counting due to re-imported intermediates. Moreover, it is sensitive to changes in the country-distribution of value added. We identify global value chains (GVCs) by the countryindustry in which the last stage of production takes place. Using a new dataset of world input-output tables covering 40 countries, we find that since 1995 production processes for most manufacturing goods in Europe increasingly fragmented across countries, although at different paces. In 2008, GVCs of electrical products and transportation equipment were generally most internationally fragmented, while food products and minerals production the least. Averaged across products, Belgium, Ireland and the Netherlands had the most fragmented GVCs in 2008, followed by Germany, the Czech Republic, and Hungary, where fragmentation increased at a high pace since 1995. We also find that in 1995, European value chains were mainly fragmented across other EU countries. Afterwards, however, there has been a strong trend towards increased participation of non-European countries. The financial crisis in 2008 led only to a temporary reduction in international production fragmentation.

Suggested Citation

  • Los, Bart & Timmer, Marcel & Vries, Gaaitzen J. de, 2013. "Made in Europe? Trends in International Production Fragmentation," GGDC Research Memorandum GD-131, Groningen Growth and Development Centre, University of Groningen.
  • Handle: RePEc:gro:rugggd:gd-131
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    File URL: http://irs.ub.rug.nl/ppn/35639025X
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    References listed on IDEAS

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    1. 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.
    2. 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.
    3. Richard E. Baldwin, 2011. "Multilateralising Regionalism: Spaghetti Bowls as Building Blocks on the Path to Global Free Trade," Chapters,in: International Handbook on the Economics of Integration, Volume I, chapter 2 Edward Elgar Publishing.
    4. Erik Dietzenbacher & Alex R. Hoen & Bart Los, 2000. "Labor Productivity in Western Europe 1975–1985: An Intercountry, Interindustry Analysis," Journal of Regional Science, Wiley Blackwell, vol. 40(3), pages 425-452, August.
    5. Dalia Marin, 2006. "A New International Division of Labor in Europe: Outsourcing and Offshoring to Eastern Europe," Journal of the European Economic Association, MIT Press, vol. 4(2-3), pages 612-622, 04-05.
    6. Jason Dedrick & Kenneth L. Kraemer & Greg Linden, 2010. "Who profits from innovation in global value chains? A study of the iPod and notebook PCs," Industrial and Corporate Change, Oxford University Press, vol. 19(1), pages 81-116, February.
    7. David Hummels, 2007. "Transportation Costs and International Trade in the Second Era of Globalization," Journal of Economic Perspectives, American Economic Association, vol. 21(3), pages 131-154, Summer.
    8. Marcel Timmer & Abdul A. Erumban & Reitze Gouma & Bart Los & Umed Temurshoev & Gaaitzen J. de Vries & I–aki Arto & Valeria Andreoni AurŽlien Genty & Frederik Neuwahl & JosŽ M. Rueda?Cantuche & Joseph , 2012. "The World Input-Output Database (WIOD): Contents, Sources and Methods," IIDE Discussion Papers 20120401, Institue for International and Development Economics.
    9. Hans‐Werner Sinn, 2006. "The Pathological Export Boom and the Bazaar Effect: How to Solve the German Puzzle," The World Economy, Wiley Blackwell, vol. 29(9), pages 1157-1175, September.
    10. Jan Oosterhaven & Alex R. Hoen, 1998. "original: Preferences, technology, trade and real income changes in the European Union An intercountry decomposition analysis for 1975-1985," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 32(4), pages 505-524.
    11. Erik Dietzenbacher & Isidoro Romero, 2007. "Production Chains in an Interregional Framework: Identification by Means of Average Propagation Lengths," International Regional Science Review, , vol. 30(4), pages 362-383, October.
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    Cited by:

    1. Nadia Garbellini & Enrico Marelli & Ariel Luis Wirkierman, 2014. "Domestic demand and global production in the Eurozone: A multi-regional input-output assessment of the global crisis," International Review of Applied Economics, Taylor & Francis Journals, vol. 28(3), pages 336-364, May.

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