Chapter 1: The Development of Input Trade and Production Networks in East Asia
Daisuke Hiratsuka and Yoko Uchida INTRODUCTION 1.1 As noted in the preface, East Asia’s rapid growth in intermediate input trade, and the associated emergence of sequential production blocks that are separately located across countries, according to comparative advantage in factors such as technology, factor endowment, trade and investment promotion measures, and market size, has resulted in a huge expansion of intermediate trade in the region. Yet despite this phenomenon, apart from contributions by Kimura and Ando (2005) and Ng and Yeats (1999), so far there have been no rigorous studies, and the causes and extent of intermediate input trade and the resulting production networks in East Asia remain unclear. This book aims to make good this deficiency by presenting rigorous empirical analyses of the growth of intermediate input trade and by capturing the main features and characteristics of production networks in East Asia. We separate the question: ‘why and to what extent have intermediate input trade and resulting production networks developed in East Asia?’ into three stages, because the subject is too large and complicated to answer otherwise. First we examine to what extent intermediate input trade has developed within the East Asian region. Several scholars have examined production networks in East Asia. Kimura and Ando (2005), using microdata relating to Japanese firms as well as trade statistics, claim that production networks have developed to a greater extent in East Asia than in any other major region of the world. Ng and Yeats (1999) used parts and components data...
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