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  1. Home
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  3. American Economic Review
  4. May 2012
  5. Proximity and Production Fragmentation

Proximity and Production Fragmentation

  • Robert C. Johnson
  • Guillermo Noguera
American Economic Review
vol. 102, no. 3, May 2012
(pp. 407-11)
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Abstract

Cross-border production chains tend to include geographically proximate countries. This suggests that increases in fragmentation should be largest among nearby trading partners, and thus may serve to localize gross trade. Using data on gross and value added trade from 1970-2009, we present three results supporting this conjecture. First, value added to export ratios are lower and falling more rapidly within geographic regions than between them. Second, gross trade travels shorter distances from source to destination than value added trade, and this gap is growing over time. Third, bilateral value added to export ratios have fallen most among nearby trading partners.

Citation

Johnson, Robert C., and Guillermo Noguera. 2012. "Proximity and Production Fragmentation." American Economic Review, 102 (3): 407-11. DOI: 10.1257/aer.102.3.407

JEL Classification

  • M11 Production Management
  • F14 Country and Industry Studies of Trade
  • L14 Transactional Relationships; Contracts and Reputation; Networks