Location, profitability, and international trade liberalization in European textile-clothing firms

Francisco Puig, Ana Debón, Santiago Cantarero and Helena Marques

Economic Modelling, 2023, vol. 129, issue C

Abstract: In the European traditional manufacturing sector (TMS), there is a vigorous debate concerning the real impact of international trade liberalization on firm profitability. Based on firm-level data from five European countries, we analyze how location, productive subsector, and firm characteristics are associated with the profitability of the European textile-clothing industry in the pre- and post-trade liberalization period. Our results reveal that the externalities derived from geographical proximity were diluted after international trade liberalization. Moreover, larger companies and those that focus on high value-added products, as represented by Northern European firms, show a stronger association with profitability. Accordingly, this observation calls into question the future of some TMS activities in a globalized world. Therefore, manufacturing strategies and industrial policies should be location- and context-specific.

Keywords: Liberalization; Location; Manufacturing strategies; European firms; Textile-clothing industry (search for similar items in EconPapers)
JEL-codes: F23 L67 R11 R12 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:129:y:2023:i:c:s0264999323003759

DOI: 10.1016/j.econmod.2023.106563

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