Incomplete Specialization and Trade in Parts and Components

Richard Frensch (), Jan Hanousek and Evžen Kočenda

No wp1044, William Davidson Institute Working Papers Series from William Davidson Institute at the University of Michigan

Abstract: Within a higher-dimensional incomplete specialization Heckscher-Ohlin framework, we first develop a gravity model that views bilateral gravity equations as statistical relationships constrained on countries’ multilateral specialization patterns. Second, we test our model empirically by using a uniquely detailed and large European data set. We show that trade in the parts and components of capital goods is driven by supply-side country differences relative to the rest of the world, compatible with models of incomplete specialization and trade. We take our results as evidence of the existence of international production networks in Europe, driven by trade-offs between wages and coordination costs.

Keywords: International trade; gravity model; offshoring; panel data; European Union (search for similar items in EconPapers)
JEL-codes: C23 F14 F23 (search for similar items in EconPapers)
Pages: pages
Date: 2013-03-01
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 (8)

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Related works:
Working Paper: Incomplete specialization and offshoring across Europe (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:wdi:papers:2013-1044

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