Supply-chain trade and labor market outcomes: The case of the 2004 European Union 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 the accession of 10 Central and Eastern European Countries (CEECs) to the European Union affected European supply-chain trade. We find that accession primarily fostered CEECs’ integration in global value chains of other entrants. Smaller integration benefits stem for East–West trade in services for lower-skill activities. These increases in value-added exports translate into sizeable job creation.