East Asian Production Networks Go Beyond the Gravity Prediction

This paper provides empirical evidence that suppor ts the continuing impor tance of machinery international production networks (IPNs) in East Asia. We first confirm their robustness and resilience, even during the coronavirus disease (COVID-19) pandemic, as well as the significance of East Asian countries as suppliers of machinery final products and par ts and components for the world. Then, we demonstrate how deeply East Asian countries are committed to machinery IPNs by applying a gravity equation to pre-pandemic bilateral machinery trade and comparing actual values with fitted values of the estimated equation. The gravity estimation exercise indicates that machinery trade is basically regional— within Factory Asia, Factory Nor th America, and Factory Europe—but Factory Asia also has strong inter-regional linkages. It also verifies that ASEAN has played an impor tant role in Factory Asia, going far beyond the gravity prediction, for the development of machinery IPNs.