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Does Value Chain Integration Dampen Producer Price Developments? Evidence from the European Union

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  • Klaus S. Friesenbichler
  • Agnes Kügler
  • Andreas Reinstaller

Abstract

We draw on trade theory to empirically explore the effects of value chain integration on producer price dynamics. Using the EU as an example of an integrated area, we construct measures of backward and forward linkages with intra- and extra-EU trading partners at the country-sector level. We find that especially upstream integration and EU-accession dampen inflation. The results for downstream integration indicate a price-increasing relationship. We propose novel EU integration indicators and offer insights to both theory and applied research. We also add to the policy debate on the price effects of (dis-)integration of EU countries.

Suggested Citation

  • Klaus S. Friesenbichler & Agnes Kügler & Andreas Reinstaller, 2021. "Does Value Chain Integration Dampen Producer Price Developments? Evidence from the European Union," WIFO Working Papers 602, WIFO.
    • Handle: RePEc:wfo:wpaper:y:2020:i:602
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    Cited by:

    1. Schwarzbauer, Wolfgang & Koch, Philipp, 2020. "Freihandel und Wohlstand gehen zusammen," Policy Notes 43, EcoAustria – Institute for Economic Research.
    2. Agnes Kügler & Andreas Reinstaller & Klaus S. Friesenbichler, 2023. "Can value chain integration explain the diverging economic performance within the EU?," Economia e Politica Industriale: Journal of Industrial and Business Economics, Springer;Associazione Amici di Economia e Politica Industriale, vol. 50(1), pages 25-47, March.
    3. Friesenbichler, Klaus S. & Kügler, Agnes, 2022. "Servitization across countries and sectors: Evidence from world input-output data," Economic Systems, Elsevier, vol. 46(3).

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    Keywords

    inflation; EU integration; Single Market; producer prices; value chains;
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