Abstract:
Trade relationships built through production chains appear to be lasting due to relation-specific nature of the transactions, compared with the usual transactions of goods sold on the open market. This paper aims to verify such stability of international production networks at the global level, with special emphasis on intra-East Asian trade. A series of survival analyses provide an evidence suggesting that the stability of international production networks is a particularly prominent feature of East Asia. In addition, East Asian countries are more likely to engage in long-lasting trade relationships of intermediate goods with each other than with outsiders as well as compared to outside the region, unlike in the case of finished products.
Machine summary:
"In the light of the fact that the machinery industry extends the most sophisticated production networks in East Asia and other regions, along with active transactions of intermediate goods across borders, this paper examines trade relationships of machinery parts & components, in comparison with those of finished products.
A series of survival analyses highlight that trade relationships of machinery parts & components, particularly among East Asian countries, have a higher probability of continuance compared to those of finished products.
years active and the higher proportion of the observed exporter- importer-product pairs for parts & components are characteristics common to all, the figures for intra-East Asian trade are saliently high.
Intra-East Asian trade relationships have a 5% lower hazard rate with respect to other trade flows when they are of parts & components, but such a difference is not significantly detected in the case of finished products.
The difference in the estimated hazard ratio for the intra-East Asia dummy between East Asian exports and imports is further examined by conducting the estimation separately for parts & components and finished products.
In other words, when limiting our focus on East Asian exports and imports by excluding the transactions outside the region, the hazard rates significantly differ between intra-regional trade partners and outsiders only in the cases of exports of parts & components and imports of finished products.
Particularly for the export side, East Asian countries are more likely to engage in long- lasting trade relationships of intermediate goods with intra-regional partners than with outsiders, unlike in the case of finished products."