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Hiroyuki Taguchi and Ni Lar
''Suitability of fragmentation model in East Asia''
( 2016, Vol. 36 No.3 )
This paper examines the suitability of the fragmentation model in all the manufacturing industries in East Asia. Its main contribution is to apply the fully-modified gravity trade model to all the manufacturing industries in East Asia by including the two factors of fragmentation: the differences in location advantages and the levels of service-link costs. The empirics show that the total industry represents the suitability of the fragmentation only in the trade of intermediate goods, probably because the fragmentation accompanies active back-and-forth international transactions of intermediate goods such as processed goods, parts and components. As for the industrial estimation, the fragmentation model best fits the industries of chemicals, steel and machinery, since these industries may involve a large number of multi-layered vertical production processes so that the mechanics of fragmentation can be working well. The more in-depth analysis should, however, be required to support the estimation results with limited samples above.
Keywords: Fragmentation, East Asia, Location Advantages, Service-link Costs
JEL: F1 - Trade: General
O1 - Economic Development: General
Manuscript Received : Jan 09 2016 Manuscript Accepted : Sep 11 2016

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