Changing Patterns of International Integration: Germany and Italy in the Countries of EU Enlargement

offshoring undertaken in the new members of EU in the period 1998-2006. Recent empirical evidence (Danninger, Joutz 2007 IMF) shows that dominant factors explaining the increase in German market shares are trade relationships with fast growing countries and regionalized production in the export sector. According to the empirical evidence available for Italy (Di Maio, Tamagni 2006), the productivity/income content of trade specialization has decreased in the last decade. After an in-depth analysis of bilateral trade flows by final goods and intermediate goods categories, trade data are linked to the firm-level productivity analysis of Italian and German presence in the new member states of European Union. The domestic value added content and the imported intermediates content of exports from both countries to new members are disentangled following Hummels, Ishii and Yi (2001), whereas a sample of 38270 firms, located in new member states but owned by residents in old members, allows not only to measure relative firm-level productivity, but also to control for pure ownership effect, vertical versus horizontal FDI strategy and corporate governance characteristics. Data come from different sources: Eurostat-ComExt for trade, national statistics offices for input output tables, AMADEUS for firm-level data.