Trade in parts and components across Europe

Richard Frensch, Jan Hanousek and KoÄ enda, Evžen
Authors registered in the RePEc Author Service: Evžen Kočenda

No 10932, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: Using the factor-proportion based gravity framework we identify driving forces for trade in parts and components. We test our model empirically by using a detailed and large data set of European trade in parts and components of capital goods and show that such trade between East and West Europe is driven by relative supply-side country differences, compatible with models of incomplete specialization and trade. We take our results as evidence for the existence of international East-West production networks in Europe, driven by trade-offs between wages and coordination costs. Our results also reveal that in response to stronger relative wage differences trade in parts and components across Europe is predominantly realized along the extensive margin.

Keywords: European union; Gravity model; International trade; Panel data; Production networks (search for similar items in EconPapers)
JEL-codes: C23 F14 F23 (search for similar items in EconPapers)
Date: 2015-11
New Economics Papers: this item is included in nep-eur and nep-int
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Trade in Parts and Components across Europe (2016)
Working Paper: Trade in parts and components across Europe (2016)
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