Trade Openness and International Fragmentation of Production in the European Union: The New Divide?

17 Pages Posted: 18 Jul 2012

Date Written: August 2012

Abstract

The relationship between international fragmentation of production, trade openness, and global export performance in the European Union (EU) from 2000 to 2009 is analyzed. As most trade models featuring international production sharing show, higher levels of fragmentation and of related international openness improve the export performance of a country. The empirical analysis confirms this hypothesis. This paper estimates an error correction model on the panel of the EU Member States and finds that inter‐European fragmentation and openness significantly improve their long‐run export performance. Policy implications could be that restrictive policies preventing firms from internationalizing production would weaken a country's position in global production networks, with long‐term negative effects on domestic jobs and growth.

Suggested Citation

Guerrieri, Paolo and Vergara Caffarelli, Filippo, Trade Openness and International Fragmentation of Production in the European Union: The New Divide? (August 2012). Review of International Economics, Vol. 20, Issue 3, pp. 535-551, 2012, Available at SSRN: https://ssrn.com/abstract=2111752 or http://dx.doi.org/10.1111/j.1467-9396.2012.01037.x

Paolo Guerrieri (Contact Author)

affiliation not provided to SSRN

No Address Available

Filippo Vergara Caffarelli

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

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