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Trade Openness and International Fragmentation of Production in the European Union: The New Divide?
Author(s) -
Guerrieri Paolo,
Vergara Caffarelli Filippo
Publication year - 2012
Publication title -
review of international economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.513
H-Index - 58
eISSN - 1467-9396
pISSN - 0965-7576
DOI - 10.1111/j.1467-9396.2012.01037.x
Subject(s) - openness to experience , fragmentation (computing) , international economics , international trade , european union , economics , production (economics) , position (finance) , macroeconomics , psychology , social psychology , finance , computer science , operating system
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.