Journal
ECONOMIC MODELLING
Volume 129, Issue -, Pages -Publisher
ELSEVIER
DOI: 10.1016/j.econmod.2023.106563
Keywords
Liberalization; Location; Manufacturing strategies; European firms; Textile -clothing industry
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This study analyzes the changes in profitability in the European textile-clothing industry before and after trade liberalization based on firm-level data from five European countries. Results show that international trade liberalization weakens the externalities derived from geographical proximity, while larger companies and those focusing on high value-added products are more strongly associated with profitability.
In the European traditional manufacturing sector (TMS), there is a vigorous debate concerning the real impact of international trade liberalization on firm profitability. Based on firm-level data from five European countries, we analyze how location, productive subsector, and firm characteristics are associated with the profitability of the European textile-clothing industry in the pre- and post-trade liberalization period. Our results reveal that the externalities derived from geographical proximity were diluted after international trade liberalization. Moreover, larger companies and those that focus on high value-added products, as represented by Northern European firms, show a stronger association with profitability. Accordingly, this observation calls into question the future of some TMS activities in a globalized world. Therefore, manufacturing strategies and industrial policies should be location- and context-specific.
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