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Fragmentation and East Asia’s Information Technology Trade

  • Carl Bonham

    ()

    (Department of Economics, University of Hawaii at Manoa)

  • Byron Gangnes

    ()

    (Department of Economics, University of Hawaii at Manoa)

  • Ari Van Assche

    ()

    (Department of Economics, University of California at Davis)

This paper studies the growth and determinants of information technology (IT) trade in the Asia-Pacific region. We argue that the rise of IT trade must be understood within the context o increasing vertical fragmentation of production processes that has occurred over the past two decades. To evaluate this empirically, we estimate a set of pooled bilateral IT export equations for eight Asian countries, the U.S. and the E.U., where FDI inflows are introduced as a proxy for fragmentation. We apply a panel cointegration approach that allows for heterogeneity in short-run dynamics and in fixed effects. Consistent with production fragmentation, we find that the evolution of IT trade can be explained in part by traditional income and relative price effects but also by FDI inflow.

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File URL: http://www.economics.hawaii.edu/research/workingpapers/WP_04-9.pdf
File Function: First version, 2004
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Paper provided by University of Hawaii at Manoa, Department of Economics in its series Working Papers with number 200409.

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Length: 28 pages
Date of creation: 2004
Date of revision:
Handle: RePEc:hai:wpaper:200409
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  22. Phillips, Peter C B & Hansen, Bruce E, 1990. "Statistical Inference in Instrumental Variables Regression with I(1) Processes," Review of Economic Studies, Wiley Blackwell, vol. 57(1), pages 99-125, January.
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