The unprecedented expansion of global production sharing in emerging economies, outperforming their advanced counterparts, has altered the patterns of world manufacturing trade. The final assembly trade and increased economic integration are crucial drivers of the expansion. Given the background, the current study throws some light on three relatively underexplored aspects of global production sharing, using a sample of 54 emerging economies for 2000-17. The objectives of the study are to (i) examine the role of trade continuity in global production sharing, (ii) compare the effect of economic integration agreements on the intra-regional potential for production sharing, and (iii) examine the effect of global production sharing on export performance. The primary data source for the study is the United Nations Commodity Trade Statistics. We also use the World Development Indicators, CEPII database, Mario Larch's RTA database, International Finance Statistics, and Heritage Foundation.

We analyse the role of trade continuity on global production sharing using a panel gravity model, estimated with the Poisson Pseudo Maximum Likelihood (PPML) method. We measure trade continuity using the lagged imports of intermediate goods. The results suggest that trade continuity has a positive and significant effect on global production sharing. Further, we find the stage-specific effects of trade continuity on global production sharing. Imports of parts and components and final assembly are significant in the contemporaneous exports of their respective stages. Our analysis also shows that countries in global production sharing prefer to trade with partners with similar economic development. Besides, we show that low-income developing countries depend on high-income developing countries to launch into global production sharing.

We examine the effect of economic integration agreements on the potential for intra-regional production sharing for Latin and Central America and Southeast Europe and Central Asia, using a panel gravity model estimated with the PPML method. Our findings reveal the positive effect of economic integration agreements on production sharing in both regions. The agreements have heterogeneous effects on intra-regional production sharing. The short-term effects of economic integration agreements are higher for intermediate goods than long-term effects. We find that most agreements have unrealised potential for production sharing, indicating scope to enhance intraregional production sharing without altering the trade conditions. We observe that multilateral agreements have relatively higher untapped potential. We also find that two or more countries overlapping in many agreements can have their role reversed as potential contributors.

We investigate the relationship between a country's participation in global production sharing on manufacturing export performance, using the system generalised method of moments estimator. We find that participation in global production sharing has a positive and significant impact on manufacturing exports, with more substantial effects for propensity to import than export. We also find that parts and components and final assembly trade positively affect manufacturing exports. However, final assembly trade has a quantitatively prominent effect on manufacturing exports than parts and components. Besides, the effects are higher in magnitude for imports than exports.

Keywords:

Global production sharing, parts and components, final assembly, emerging economies, trade continuity, the potential for production sharing.

JEL Classification:

F10. F13. F14. F15.