Supply-Chain Trade and Labor Market Outcomes: The Case of the EU 2004 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 10 Central and Eastern European Countries (CEECs) accession to the European Union (EU) affected European supplychain trade. We find that accession primarily fostered CEECs’ integration in value chains of other entrants, not incumbents. Upgrading dynamics in terms of more skillintensive production are also driven by intra-CEEC integration. Smaller integration benefits stem for East-West trade in services for low-skill activities. These increases in value added exports translate into job creation.