Production Fragmentation and Factor Price Convergence

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Title:

Production Fragmentation and Factor Price Convergence

Number:

17/18

Author(s):

Hülya Saygılı

Language:

English

Date:

August 2017

Abstract:

In this analysis, we empirically analyze if the nature of trade matters for international factor price convergence. In particular, we examine whether factor prices converge when country pairs involve with more bilateral production fragmentation arrangements. We apply panel fixed effect techniques using data for five EU countries. The analyses are controlled for alternative trade related indicators such as bilateral trade intensity and bilateral intra-industry trade as well as for industrial similarity variables. We find that bilateral production fragmentation plays a key role in labor cost converging effects of trade.

Keywords:

International factor price convergence, Production fragmentation, Trade

JEL Codes:

J31; F14; F15; F41
Production Fragmentation and Factor Price Convergence