Proximity and Production Fragmentation
Robert C. Johnson, Guillermo Noguera
American Economic Review · 2012 · Volume 102 · Issue 3
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.
Keywords
Production Management, Country and Industry Studies of Trade, Transactional Relationships, Contracts and Reputation, Networks
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