jei Vol.28 No.2, June 2013, 204~240 Mitsuyo Ando and Fukunari Kimura http://dx.doi.org/10.11130/jei.2013.28.2.204 204 Abstract This paper investigates the novel development of machinery trade pattern in the Central and Eastern Europe (CEE) and analyzes the extent and depth of production networks in Europe from the perspective of their links with East Asia during the past 15 years, 1995~2010. Our descriptive analysis based on the total value of trade and the extensive margin demonstrates further production fragmentation in Europe, shifting from Western Europe (CEE production sharing to a regional network with more active transactions among CEE countries) to a global link with East Asia via CEE, particularly in the electric machinery sector. Our quantitative analysis verifies the evolution of production networks in Europe, from regional to global. These results partially reflect the reduction in services link costs, the evolution of industrial clustering among CEE countries particularly after the EU enlargement, and the strengthening competence of production networks in East Asia. JEL Classifications: F14, F15, F23, L23 Key Words: The 2nd unbundling, Fragmentation, Agglomeration, Intensive and Extensive Margins, Machinery trade Production Linkage of Asia and Europe via Central and Eastern Europe jei Journal of Economic Integration Mitsuyo Ando Keio University, Tokyo, Japan Fukunari Kimura Keio University, Tokyo, Japan * Corresponding Author: Mitsuyo Ando; Faculty of Business and Commerce, Keio University, 2-15-45 Mita, Minato-ku, Tokyo 108- 8345, Japan; Tel: +81 334534511, Fax: +81 354271578, E-mail: m-ando@fbc.keio.ac.jp. Co-Author: Fukunari Kimura; Faculty of Economics, Keio University, 2-15-45 Mita, Minato-ku, Tokyo 108-8345, Japan; Tel: +81 334534511, Fax: +81 354271578, E-mail: fkimura@econ.keio.ac.jp. Acknowledgements: The authors would like to acknowledge anonymous referees for valuable comments. ⓒ 2013-Center for Economic Integration, Sejong Institution, Sejong University, All Rights Reserved. pISSN: 1225-651X eISSN: 1976-5525 Vol.28 No.2, June 2013, 204~240 http://dx.doi.org/10.11130/jei.2013.28.2.204