Cars Made in Europe

Abstract

The transport equipment industry is nowadays amongst the most important manufacturing industries, responsible for a large share of production, exports and R&D in Central and Eastern European countries, particularly the Czech Republic, Slovakia and Hungary. This success is due to the fact that strong production linkages with Western European countries have been developed, particularly with Germany, spurred by large inflows of foreign direct investment and the arrival of large international car companies. Production processes in this industry are nowadays heavily internationally fragmented. We use the World Input-Output Database, which allows us to investigate the evolution of these production linkages across European countries and other major economies in the world in this industry. Considering the time period 1995-2011 and applying input-output indicators reveals changing patterns of domestic and international linkages, patterns of vertical specialization and direct and indirect value-added flows across countries in both the Western and Eastern European countries. By utilizing additional data we draw a more detailed picture of the evolution of these production linkages from which all countries have benefitted.