International Fragmentation of Production

International Fragmentation of Production

The Impact of Outsourcing on the Japanese Economy

Nobuaki Yamashita

Using state-of-the-art econometric tools, this book examines the implications of international fragmentation of production for the performance of the Japanese manufacturing industry.

Chapter 4: Determinants of Fragmentation Trade

Nobuaki Yamashita

Subjects: asian studies, asian economics, economics and finance, asian economics, industrial economics

Extract

INTRODUCTION This chapter undertakes an econometric analysis of the determinants of fragmentation trade in Japan, using panel data covering the period from 1988 to 2005. To the best of the author’s knowledge this is the first systematic analysis of the Japanese experience.1 Existing studies, including Baldone et al. (2001) and Egger and Egger (2005), focus on specific country groups such as the EU. Jones et al. (2004) and Athukorala and Yamashita (2008) examine production fragmentation at the global level, while Egger and Egger (2003) focus on the Austrian experience and Görg (2000) and Swenson (2005, 2007) examine the case of the USA. This chapter extends the existing literature in a number of aspects. First, an econometric analysis uses a comparative approach between Japan and the USA. As noted in Section 3.3, there are some visible differences in the patterns of fragmentation trade between Japan and the USA. In addition, the business management literature indicates that cross-border production networks appear to be different between Japanese and US MNEs (see Section 2.3.3). Hence, the relative importance of factors affecting the extent of fragmentation trade between Japan and the USA can be different. Second, few econometric studies have been done so far to exploit trade data relating to parts and components as a measure of fragmentation trade apart from Jones et al. (2004) and Athukorala and Yamashita (2006), as discussed in Section 2.4. This chapter extends their approach and constructs three dimensional panel data sets (industry, country and year). Third, the analytical...

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