Information Technology Trade and Asia-Pacific Interdependence

Abstract

Over the past two decades, East Asian economies have become centers of world production and export for Information Technology (IT) products. Growth in global IT demand and relocation of labor-intensive production stages to the low-wage Asian countries has fueled rapid expansion of industrial production, wealth and trade. At the same time, the dramatically increased specialization in IT production has increased vulnerability of these economies to industry cycles and dependence on broader business cycle fluctuations in the dominant North American market. In this paper we study the growth and determinants of IT trade in the Asia-Pacific region. We argue that the rise of IT trade must be understood within the context of increasing vertical fragmentation of production processes that has occurred in the last two decades. This has implications for the appropriate specification of empirical trade equations for IT products. We present preliminary results of pooled bilateral export equations for East-Asian IT exports.

Download Seminar Paper