International Fragmentation of Production and Trade Volatility: An Analysis for the European Countries

Anna Maria Falzoni¹, Lucia Tajoli²

¹Department of Management, Economics and Quantitative Methods, Università di Bergamo, Bergamo, Italy.
²Department of Management, Economics and Industrial Engineering, Politecnico di Milano, Milano, Italy.

DOI: 10.4236/me.2015.63032                

Abstract

In the last years, world exports have displayed very strong fluctuations, much higher than GDP fluctuations. Some recent works tried to understand the causes of these fluctuations, and in particular if these strong swings in world trade flows are related to the growing weight of intermediates in trade and to the phenomenon of international fragmentation of production (IFP) or international outsourcing. This is the issue addressed in this paper. We analyze the influence of international fragmentation of production and trade in intermediate goods on the fluctuations of trade flows for the EU countries. After assessing the relevance of international trade in intermediate goods at the sector level using indices computed from the input-output tables of the EU countries, we test whether a significant relation exists between the extent of international fragmentation of production measured by this proxy and the volatility of trade flows, and the possible implications of these results.

Keywords

Trade Fluctuations, International Outsourcing, Intermediate Goods

Conflicts of Interest

The authors declare no conflicts of interest.

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