Determinants of International Fragmentation of Production in the European Union

Arbeitspapier

The last decades were characterized by large increases in world trade, not only in absolute terms, but also in relation to world GDP. This was in large parts caused by increasing exchanges of parts and components between countries as a consequence of international fragmentation of production. Apparently, greater competition especially from the Newly Industrializing and Post-Communist Economies prompted firms in 'high-wage' countries to exploit international factor price differences in order to increase their international competitiveness. However, theory predicts that, beside factor price differences, vertical disintegration of production should be driven by a multitude of additional factors. Against this background, the present paper reveals empirical evidence on parts and components trade as an indicator for international fragmentation of production in the European Union. On the basis of a panel data approach, the main explanatory factors for international fragmentation of production are determined. The results show that, although their influence can not be neglected, factor price differences are only one out of many causes for shifting production to or sourcing components from foreign countries.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: IWH Discussion Papers ; No. 15/2007

Classification and Topics

• Classification: Wirtschaft ; Empirical Studies of Trade ; Multinational Firms; International Business ; Organization of Production
• Subject: economic integration ; international fragmentation of production ; Internationale Arbeitsteilung ; Komparativer Kostenvorteil ; Lieferanten-Kunden-Beziehung ; Outsourcing ; Auslandsproduktion ; Vorprodukt ; EU-Staaten

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Zeddies, Götz
• Event: Veröffentlichung
• (who): Leibniz-Institut für Wirtschaftsforschung Halle (IWH)
• (where): Halle (Saale)
• (when): 2007

Further information

• Handle: http://hdl.handle.net/10419/29986
• URN: urn:nbn:de:gbv:3:2-6293
• Last update: 10.03.2025, 11:43 AM CET