Journal of Economics and Management Volume 15, No. 2 August, 2019

Asian Fragmentation and Extensive Margin of International Trade

Chin-Ho Lin

Department of Economics, Feng Chia University, Taiwan.

Abstract

This paper explores the depth and extent of participation in international machinery production networks to quantify the extent of global production sharing by using highly disaggregated international trade data at the Harmonized System six-digit product level. We examine and quantify changes in the number of product–country pairs exported from East Asian countries to international trading partners during 1996–2013. Specifically, we estimate the probability of exporting in terms of goods being traded with international trading partners in 2013, and analyze whether distinct product categories cause significant differences in performance in the extensive margins of production networks (namely those involving parts and components and final products). Our probit estimate with marginal effects predicts a 14.3% higher probability of exporting parts and components than exporting final products in 2013. Moreover, we further decompose the characteristics of product–country pairs and find that parts and components have a 12.8% higher probability of becoming new product–country pairs and a 14.5% lower probability of becoming disappearing product–country pairs, compared with final products. These marginal effects are robust even if individual East Asian countries are considered.

Keywords：Asian Fragmentation, International Production Networks, Machinery Industry, Extensive Margin.

JEL Classifications：F12, F14, F15.

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