Fragmentation and East Asia's Information Technology Trade

University of Hawaii Economics Working Paper No. 04-9

28 Pages Posted: 2 Nov 2004

See all articles by Carl Bonham

Carl Bonham

University of Hawaii - Department of Economics

Byron Gangnes

University of Hawaii - Department of Economics

Ari Van Assche

University of California, Davis

Date Written: October 26, 2004

Abstract

This paper studies the growth and determinants of information technology (IT) trade in the Asia-Pacific region. We argue that the rise of IT trade must be understood within the context of increasing vertical fragmentation of production processes that has occurred over the past two decades. To evaluate this empirically, we estimate a set of pooled bilateral IT export equations for eight Asian countries, the U.S. and the E.U., where FDI inflows are introduced as a proxy for fragmentation. We apply a panel cointegration approach that allows for heterogeneity in short-run dynamics and in fixed effects. Consistent with production fragmentation, we find that the evolution of IT trade can be explained in part by traditional income and relative price effects but also by FDI inflow.

Keywords: Fragmentation, information technology, FDI and trade, trade elasticities, panel data

JEL Classification: C33, F14, F23

Suggested Citation

Bonham, Carl and Gangnes, Byron and Van Assche, Ari, Fragmentation and East Asia's Information Technology Trade (October 26, 2004). University of Hawaii Economics Working Paper No. 04-9, Available at SSRN: https://ssrn.com/abstract=612001 or http://dx.doi.org/10.2139/ssrn.612001

Carl Bonham

University of Hawaii - Department of Economics ( email )

Honolulu, HI 96822
United States

Byron Gangnes (Contact Author)

University of Hawaii - Department of Economics ( email )

Honolulu, HI 96822
United States

Ari Van Assche

University of California, Davis ( email )

One Shields Avenue
Apt 153
Davis, CA 95616
United States

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