Proximity and Production Fragmentation

Robert C. Johnson · Guillermo Noguera

172 citations0/0 files storedAmerican Economic Review

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Global trade and economics Global trade, sustainability, and social impact Economic and Technological Innovation

Abstract

Cross-border production chains tend to include geographically proximate countries. This suggests that increases in fragmentation should be largest among nearby trading partners, and thus may serve to localize gross trade. Using data on gross and value added trade from 1970-2009, we present three results supporting this conjecture. First, value added to export ratios are lower and falling more rapidly within geographic regions than between them. Second, gross trade travels shorter distances from source to destination than value added trade, and this gap is growing over time. Third, bilateral value added to export ratios have fallen most among nearby trading partners.

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References

2001The nature and growth of vertical specialization in world trade 2011Accounting for intermediates: Production sharing and trade in value added 2003Can Vertical Specialization Explain the Growth of World Trade?2011Who produces for whom in the world economy?2010Demand Spillovers and the Collapse of Trade in the Global Recession 2011Give Credit Where Credit is Due: Tracing Value Added in Global Production Chains 2012Fragmentation and Trade in Value Added over Four Decades 2010Can Multistage Production Explain the Home Bias in Trade?

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