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Production Sharing and Regional Integration

Author

Listed:
  • Sven W. Arndt

    (Lowe Institute of Political Economy, Claremont McKenna College)

Abstract

Preferential trade agreements between dissimilar economies are known to encourage inter-industry specialization, but when they take place between developed and developing countries, they also change the nature of intra-industry trade by facilitating cross-border production sharing. When such arrangements liberalize foreign direct investment as well as trade, production is internationalized and component or intra-product trade increases. Using a standard trade model, this paper derives the conditions under which integration of this type improves competitiveness and raises employment, output, and welfare.

Suggested Citation

  • Sven W. Arndt, 2002. "Production Sharing and Regional Integration," Working Papers 0203, Lowe Institute of Political Economy.
    • Handle: RePEc:loi:wpaper:0203
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    File URL: http://lowe.claremontmckenna.edu/pdf/WP02-03.pdf
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    More about this item

    Keywords

    component trade; open regionalism; preferential trade liberalization; production networks;
    All these keywords.

    JEL classification:

    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade
    • F15 - International Economics - - Trade - - - Economic Integration
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

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