Supply‐chain trade and labor market outcomes: The case of the 2004 European Union enlargement

Abstract

The structure of international trade is increasingly characterized by fragmentation of production processes and trade policy. Yet, how trade policy affects supply-chain trade is largely unexplored territory. This paper shows how the accession of 10 Central and Eastern European Countries (CEECs) to the European Union affected European supplychain trade. We find that accession primarily fostered CEECs' integration in global value chains of other entrants. Smaller integration benefits stem for East-West trade in services for lower-skill activities. These increases in valueadded exports translate into sizeable job creation. † Earlier drafts of this paper were titled "The Effects of the CEECs' Accession on Sectoral Trade: Value Added Perspective."

Consequences of Brexit and options for a 'Global Britain’

“…While traditional estimates of the gravity equation rely on gross trade data, a growing literature has emphasized the importance of using novel measures of value‐added exports (VAX) data to account for the international fragmentation of production (see, e.g., Johnson & Noguera, ; Kaplan, Kohl, & Martínez‐Zarzoso, ; Koopman, Wang, & Wei, ). In line with this development, we explicitly use data on trade in value‐added (covering both manufacturing and services) instead of gross exports (typically only covering manufacturing).…”

Trade, value chains and labor markets in advanced economies

“…A 1 per cent decrease in tariffs is estimated to lower unemployment by about 0.35 per cent, while a 10 percentage point increase in trade openness is found to reduce aggregate unemployment by about three-quarters of a percentage point (Dutt et al, 2009;Felbermayr et al, 2011). Using novel value-added trade statistics, one study finds that the 2004 EU Enlargement led to employment gains of up to 0.11% in EU15 countries (Kaplan et al, 2018).…”

Production networks in Europe: A natural experiment of the European Union enlargement to the east

“…Similarly, Hornok (2010) treats the 2004 enlargement as a quasi‐natural experiment, and using a difference in differences strategy, shows that the effect of integration is greater for the new EU members than for the old ones, and that the EU enlargement reduced the technological gap between the old and the new members, since trade of more technology‐intensive industries grew fastest. Most recently, Kaplan et al (2017) focus on the effect of accession of 10 CEECs into the EU on value‐added trade. The authors find that EU enlargement has primarily caused Eastern entrants to become more integrated in value chains with other CEECs in both manufacturing and services.…”

“…To our knowledge this is one of the first papers that show evidence of the effect of the 2004 EU enlargement for bilateral trade in intermediate and final products separately. We depart from Kaplan et al (2017) in that we use different trade data. The data in our paper come from trade statistics and not from input‐output tables (IO).…”

“…Since the second half of the 2000s a few attempts have been made to investigate whether, as in Asia in the 1990s, a similar pattern of emergence of production fragmentation has occurred on the European continent, and, in particular, following the accession of the CEECs into the European Union (EU) (Curran & Zignago, 2012; Kaminski & Ng, 2005; Kaplan, Kohl, & Martínez‐Zarzoso, 2017; Martínez‐Zarzoso, Voicu, & Vidovic, 2015; Zeddies, 2011; among others).…”