Trade in Parts and Components and the Industrial Geography of Central and Eastern European Countries |
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Authors: | Gianfranco De Simone |
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Institution: | (1) Dipartimento di Scienze Economiche, Aziendali e Statistiche, University of Milano, Via Conservatorio, 7, 20122 Milano, Italy |
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Abstract: | Growing inflows of FDI and the increasing integration of domestic firms into International Production Networks (IPNs) set
up by EU-15 partners have yielded a rise in trade in parts and components for Central and Eastern European Countries (CEECs).
As a consequence, new patterns of localization of industrial activities have been observed in the region since the mid-1990s.
In this paper, I propose a comprehensive model of trade and production which tries to explain cross-country variations of
sectoral output by comparative advantages (Ricardo, Heckscher–Ohlin) and agglomeration forces (home market effect, market
potential), with a focus on the role played by trade in middle products. The empirical implementation reveals that the higher
is the involvement in IPNs the larger is the domestic share of regional output. Comparative advantages are a crucial determinant
of localization as opposed to agglomeration forces. I argue that these results can be interpreted as an assessment of the
predictive power of two alternative trade theories.
JEL no. F10, F12, F14, F15 |
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Keywords: | Trade in parts and components fragmentation of production industry localization comparative advantages new trade theory economic geography |
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