Formation of Inter-Country Production Networks in East Asia: Application of International Input-Output Analysis

This paper analyzes trade in East Asia and inter-industry linkages over the borders, i.e. spatial linkages, with use of the Asian international input-output tables. As a result of analysis, it was shown that intra-regional trade within the eight East Asian countries, the U.S and Japan has been driven by the intermediate goods trade. At the same time, intermediate goods, especially those of the material and machinery industries, increased their proportion of intra-industry trade. On the other hand, although the structures of spatial linkages were more or less similar to those of domestic industries, the Electric Machinery industry had strong spatial forward linkage effects. Also it was shown that the percentage of intra-industry spatial linkages increased, particularly in the Electric Machinery industry, implying that the international division of labor between different stages of production or fragmentation had progressed rapidly. Finally, machinery industry clusters, especially those of the Motor Vehicles and Electric Machinery industries, expanded significantly, and the production network of the Electric Machinery industry had expanded with industries in Japan, East Asia, and the U.S. respectively located in the upstream, midstream, and downstream of roundabout production.