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O-Ring Production Networks

Author

Listed:
  • Banu Demir
  • Ana Cecília Fieler
  • Daniel Yi Xu
  • Kelly Kaili Yang

Abstract

We document strong skill matching in Turkish firms’ production networks. Additionally, in the data, export demand shocks from rich countries increase firms’ skill intensity and their trade with skill-intensive domestic partners. We explain these patterns using a quantitative model with heterogeneous firms, quality choices, and endogenous networks. A counterfactual economy-wide export demand shock of 5% leads both exporters and nonexporters to upgrade quality, raising the average wage by 1.2%. This effect is nine times the effect in a scenario without interconnected quality choices. We use the model to study the conditions for the success of export promotion policies.

Suggested Citation

  • Banu Demir & Ana Cecília Fieler & Daniel Yi Xu & Kelly Kaili Yang, 2024. "O-Ring Production Networks," Journal of Political Economy, University of Chicago Press, vol. 132(1), pages 200-247.
    • Handle: RePEc:ucp:jpolec:doi:10.1086/725703
    DOI: 10.1086/725703
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    Cited by:

    1. Francisco J. Buera & Nicholas Trachter, 2024. "Sectoral Development Multipliers," Working Paper 24-02, Federal Reserve Bank of Richmond.

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