ESSAYS ON SPECIALIZATION PATTERN, INTERNATIONAL FRAGMENTATION OF PRODUCTION AND TRADE IN VALUE ADDED

Abstract

Recently, international trade theory has seen a resurgence in studies on specialization patterns and the determinants of trade flows in a world with international fragmentation of production and trade in intermediate goods. This dissertation consists of three essays at the current frontier of research on these issues. Starting from a historical excursion of the issue of specialization in international trade theory, the first essay attempts to insert the most recent contributions into a conceptual framework that links trade specialization and international fragmentation of production. In particular, this essay focuses on the pioneer works that, in the last two decades, have brought the role of comparative advantage in explaining the patterns of trade back to the centre of the debate. These new lines of research have improved the level of knowledge and could continue to extend it regarding specific features of global trade, specialization and international fragmentation of production. The second essay presents a descriptive analysis of trade specialization of Italy and its main competitors in the manufacturing industry, using value added trade data and the most recent mathematical frameworks for trade decomposition and contributing to the long-standing debate on the “anomaly” of Italian comparative advantages. Moreover, this essay analyses the sectoral export structure so that the role of each country within the global supply and production networks can be defined and examines the bilateral trade dimension in order to identify the main source countries of foreign value added in country exports and the bilateral links between Italy and the main destination markets of its exports. Finally, the third essay presents a quantitative analysis of the impact of the euro on bilateral trade between Eurozone member states and provides two original contributions. First, the euro’s effect on trade is investigated from a value added perspective using a “gravity-like” approach. Second, this effect is estimated also using matching techniques to control for non-linearity-with-self selection. This third essay fits into a larger economic and political debate on the costs and benefits of the common currency that is more than ever still open.