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Global Value Chains During the Great Trade Collapse: A Bullwhip Effect?

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Author Info

  • Carlo Altomonte
  • Filippo Di Mauro
  • Gianmarco I. P. Ottaviano
  • Armando Rungi
  • Vincent Vicard

Abstract

This paper analyzes the performance of global value chains during the trade collapse. To do so, it exploits a unique transaction-level dataset on French firms containing information on cross-border monthly transactions matched with data on worldwide intra-.rm linkages as defined by property rights (multinational business groups, hierarchies of firms). This newly assembled dataset allows us to distinguish firm-level transactions among two alternative organizational modes of global value chains: internalization of activities (intra- group trade/trade among related parties) or establishment of supply contracts (arm's length trade/trade among unrelated parties). After an overall assessment of the role of global value chains during the trade collapse, we document that intra-group trade in intermediates was characterized by a faster drop followed by a faster recovery than arm's length trade. Amplified fluctuations in terms of trade elasticities by value chains have been referred to as the "bullwhip effect" and have been attributed to the adjustment of inventories within supply chains. In this paper we first con.rm the existence of such an effect due to trade in inter- mediates, and we underline the role that different organizational modes can play in driving this adjustment.

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Bibliographic Info

Paper provided by Centre for Economic Performance, LSE in its series CEP Discussion Papers with number dp1131.

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Date of creation: Feb 2012
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Handle: RePEc:cep:cepdps:dp1131

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Web page: http://cep.lse.ac.uk/_new/publications/series.asp?prog=CEP

Related research

Keywords: trade collapse; multinational firms; global value chains; hierarchies of firms; vertical integration;

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References

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  1. Andrew B. Bernard & Marco Grazzi & Chiara Tomasi, 2012. "Intermediaries in International Trade: Direct Versus Indirect Modes of Export," CEP Discussion Papers dp1137, Centre for Economic Performance, LSE.
  2. Raphael Bergoeing & Tim Kehoe & Vanessa Strauss-Kahn & Kei-Mu Yi, 2004. "Why is Manufacturing Trade Rising Even as Manufacturing Output is Falling?," Documentos de Trabajo 178, Centro de Economía Aplicada, Universidad de Chile.
  3. Bricongne, Jean-Charles & Fontagné, Lionel & Gaulier, Guillaume & Taglioni, Daria & Vicard, Vincent, 2012. "Firms and the global crisis: French exports in the turmoil," Journal of International Economics, Elsevier, vol. 87(1), pages 134-146.
  4. Ines Buono & Harald Fadinger & Stefan Berger, 2008. "The Micro Dynamic of Exporting-Evidence from French Firms," Vienna Economics Papers 0901, University of Vienna, Department of Economics.
  5. Maria Bas & Juan Carluccio, 2009. "Wage Bargaining and the Boundaries of the Multinational Firm," CEP Discussion Papers dp0963, Centre for Economic Performance, LSE.
  6. Ingo Borchert & Aaditya Mattoo, 2009. "The crisis-resilience of services trade," The Service Industries Journal, Taylor & Francis Journals, vol. 30(13), pages 2115-2136, August.
  7. Robert C. Feenstra & Barbara J. Spencer, 2005. "Contractual Versus Generic Outsourcing: The Role of Proximity," NBER Working Papers 11885, National Bureau of Economic Research, Inc.
  8. Abdul Abiad & Petia Topalova & Prachi Mishra, 2011. "How Does Trade Evolve in the Aftermath of Financial Crises?," IMF Working Papers 11/3, International Monetary Fund.
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Citations

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Cited by:
  1. Neugebauer, Katja & Spies, Julia, 2012. "Borrowing Locally, Operating Globally? Financing and Trading Patterns of Firms during the 2007/2008 Economic Crisis," Annual Conference 2012 (Goettingen): New Approaches and Challenges for the Labor Market of the 21st Century 62066, Verein für Socialpolitik / German Economic Association.
  2. Andrea Beltramello & Koen De Backer & Laurent Moussiegt, 2012. "The Export Performance of Countries within Global Value Chains (GVCs)," OECD Science, Technology and Industry Working Papers 2012/2, OECD Publishing.
  3. Alyson C. Ma & Ari Van Assche, 2012. "Is East Asia’s Economic Fate Chained to the West?," CIRANO Working Papers 2012s-11, CIRANO.
  4. Rudolfs Bems & Robert C. Johnson & Kei-Mu Yi, 2012. "The Great Trade Collapse," NBER Working Papers 18632, National Bureau of Economic Research, Inc.
  5. Altomonte, Carlo & Rungi, Armando, 2013. "Business groups as hierarchies of firms: determinants of vertical integration and performance," Working Paper Series 1554, European Central Bank.
  6. Antonakakis, Nikolaos, 2012. "The great synchronization of international trade collapse," MPRA Paper 39859, University Library of Munich, Germany.
  7. Veronika Zavacka, 2012. "The bullwhip effect and the Great Trade Collapse," Working Papers 148, European Bank for Reconstruction and Development, Office of the Chief Economist.
  8. Elena Biewen & Daniela Harsch & Julia Spies, 2012. "The Determinants of Service Imports: The Role of Cost Pressure and Financial Constraints," IAW Discussion Papers 90, Institut für Angewandte Wirtschaftsforschung (IAW).
  9. Martin Borowiecki & Bernhard Dachs & Doris Hanzl-Weiss & Steffen Kinkel & Johannes Pöschl & Magdolna Sass & Thomas Christian Schmall & Robert Stehrer & Andrea Szalavetz, 2012. "Global Value Chains and the EU Industry," wiiw Research Reports 383, The Vienna Institute for International Economic Studies, wiiw.

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