International fragmentation of production and Euro-Med integration

Abstract

When firms locate segments of their production process abroad we are in presence of international fragmentation of production. This paper discusses the issue both theoretically and empirically. We first assess the absence of a well-articulated and verified theoretical framework to explain the phenomenon in fullness. We then perform an analysis of economic integration patterns of South-Mediterranean countries with the European Union and compare the results with the performance of central and eastern European countries. The Mediterranean basin has the potential to host a considerable amount of European production-sharing networks. Yet the integration of firms from this region into such international networks appears to be still very modest.