Vertical Specialisation and Regional Trade Integration: A Study on Italy and Northern African Countries

Abstract

This paper uses a multistage approach to investigate the role of Italy in the Northern African countries, both in terms of trade and investment.

In particular, we show that Italian import flows for two typically Made in Italy industries, namely textile and clothing on one hand, and leather and footwear on the other hand, are strongly related not only to export flows of the same sector, but also to a set of variables capturing features of the Italian and the foreign country. In this way, we supply a first result supporting the hypothesis of an international fragmentation of production. To offer this outcome additional strength, we endow the present contribution with information on the attractiveness of the Northern African countries, looking at the volume of inward FDI flows and stocks, but with no industry disaggregation, due to data unavailability. Although we start from a global perspective, we rapidly shift to consider only the Italian investments in the area, with a breakdown by outward region. Thanks to the availability of a detailed dataset made available by the Bank of Italy, we are able to provide further evidence on the Italian internationalisation in the North of Africa. Indeed, our second result highlights the remarkable heterogeneity across countries and the emergence of the major role played by Tunisia.

Keywords: Northern Africa, Italian regions, Made in Italy, FDI, fragmentation, Global Value Chains

JEL Classification: F14, F21, F23, L67