2013 European Trade Study Group Conference, Birmingham, United Kingdom, 11 - 13 September 2013, pp.1-18
The latest phase of globalization is marked by the fragmentation of the stages of production and the dispersion of these stages to different regions around the world. Consequently, countries specialize in specific types of intermediate production stages instead of producing a final product from scratch. This phenomenon caused a dramatic increase in parts and components trade flows in recent years.
This study investigates the changing structure of Turkey’s manufacturing industry and trade in manufactures in the face of growing predominance of international fragmentation of production processes. In particular, it focuses on the determinants of parts and components trade which is a widely accepted indicator of international fragmentation of production.
The study is organized as follows: First part surveys main determinants of parts and components trade from the perspective of fragmentation theory. Using parts and components trade flows aggregated from SITC 5-digit product categories, the second part tries to investigate the reasons behind parts and components trade between Turkey and its 46 trade partners. Besides technological differences and factor endowments, other country specific factors such as market size, regional trade agreements, product diversity and the real exchange rate are included into the model and their explanatory power on parts and components trade flows are investigated. Empirical analysis is conducted in a gravity model setting and a panel data technique is used during the period covering 1992-2009. The final section is devoted to conclusions.