Trade liberalization and the allocation over domestic and foreign supplies: a case study for Spanish manufacturing

Abstract

The purpose of the paper is to investigate whether Spain's accession to the European Union in 1986 caused a structural break in the allocation of total supplies of manufactures over domestic and foreign supplies. To that end the homogeneity-constrained Almost Ideal Demand System is used to specify the long-run equilibrium relationships between the shares in total supplies and total real demand and relative prices and a first-order error correction mechanism in order to describe the adjustment process to equilibrium. Using a formal statistical test, it turns out that a structural break actually occurred and led to a rather sharp decrease in the share of Spain and an increase in the shares of the other members of the European Union.

Do foreign‐owned firms manage advanced manufacturing technology better?

“…Second mover advantage: a local branch of an international company may implement AMT efficiently because the company has already implemented similar technology elsewhere (Gold, 1989). This might, in part, explain De Boer et al (2000) finding that, when Spain joined the European Community, domestic manufacturers' share of the Spanish market shrank.…”