Causes of International Production Fragmentation: Some Evidence

Abstract

What forces have driven international fragmentation of production in recent decades? Perhaps technological innovations in information technology have allowed the coordination of integrated production processes that are separated by vast distances. Perhaps reductions in transportation costs, tariffs and other trade barriers facilitated multi-stage production, allowing components to cross several international borders and/or long distances with relatively low accumulated transit costs. Perhaps changes in the political economy of new market economies (first in Eastern Europe and then in East Asia) have opened up new possibilities for specialization in different segments of the supply chain. Each of these explanations undoubtedly plays a role, of course, and the interaction of these effects is also important. This document attempts to identify evidence that points towards one or more of these theories as a leading cause.

Keywords: Global value Chains, International production, international fragmentation

JEL Classification: Z00