IDEAS home Printed from https://ideas.repec.org/p/usg/econwp/201310.html
   My bibliography  Save this paper

Globalization and Vertical Structure: An Empirical Investigation

Author

Listed:
  • Buehler, Stefan
  • Burghardt, Dirk

Abstract

This paper studies the effect of trade facilitation on vertical firm structure using plant-level data from Switzerland. Based on the Business Census and the Input-Output table, we first calculate a binary measure of vertical integration for all plants registered in Switzerland. We then estimate the effect of a Mutual Recognition Agreement with the European Union on the plants' probability of being vertically integrated. Adopting a difference-in-differences approach, we find that this policy change reduced the treated plants' probability of being vertically integrated by about 10 percent. Our results are consistent with recent work in international trade theory.

Suggested Citation

  • Buehler, Stefan & Burghardt, Dirk, 2013. "Globalization and Vertical Structure: An Empirical Investigation," Economics Working Paper Series 1310, University of St. Gallen, School of Economics and Political Science.
    • Handle: RePEc:usg:econwp:2013:10
    as

    Download full text from publisher

    File URL: http://ux-tauri.unisg.ch/RePEc/usg/econwp/EWP-1310.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Michael D. Whinston, 2001. "Assessing the Property Rights and Transaction-Cost Theories of Firm Scope," American Economic Review, American Economic Association, vol. 91(2), pages 184-188, May.
    2. Nina Pavcnik, 2002. "Trade Liberalization, Exit, and Productivity Improvements: Evidence from Chilean Plants," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 69(1), pages 245-276.
    3. Buehler, Stefan & Haucap, Justus, 2006. "Strategic outsourcing revisited," Journal of Economic Behavior & Organization, Elsevier, vol. 61(3), pages 325-338, November.
    4. Richard Blundell & Monica Costa Dias, 2009. "Alternative Approaches to Evaluation in Empirical Microeconomics," Journal of Human Resources, University of Wisconsin Press, vol. 44(3).
    5. Daron Acemoglu & Philippe Aghion & Rachel Griffith & Fabrizio Zilibotti, 2010. "Vertical Integration and Technology: Theory and Evidence," Journal of the European Economic Association, MIT Press, vol. 8(5), pages 989-1033, September.
    6. Laura Alfaro & Paola Conconi & Harald Fadinger & Andrew F. Newman, 2010. "Do Prices Determine Vertical Integration? Evidence from Trade Policy," Harvard Business School Working Papers 10-060, Harvard Business School, revised May 2013.
    7. Marin, Dalia, 2012. "The Theory of the Firm goes Global," Discussion Papers in Economics 12690, University of Munich, Department of Economics.
    8. Gene M. Grossman & Elhanan Helpman, 2005. "Outsourcing in a Global Economy," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 72(1), pages 135-159.
    9. Daniel Trefler, 2004. "The Long and Short of the Canada-U. S. Free Trade Agreement," American Economic Review, American Economic Association, vol. 94(4), pages 870-895, September.
    10. Laura Alfaro & Paola Conconi & Harald Fadinger & Andrew F. Newman, 2016. "Do Prices Determine Vertical Integration?," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 83(3), pages 855-888.
    11. Ali Hortaçsu & Chad Syverson, 2007. "Cementing Relationships: Vertical Integration, Foreclosure, Productivity, and Prices," Journal of Political Economy, University of Chicago Press, vol. 115(2), pages 250-301.
    12. Mary Amiti & Jozef Konings, 2007. "Trade Liberalization, Intermediate Inputs, and Productivity: Evidence from Indonesia," American Economic Review, American Economic Association, vol. 97(5), pages 1611-1638, December.
    13. Ornelas, Emanuel & Turner, John L., 2008. "Trade liberalization, outsourcing, and the hold-up problem," Journal of International Economics, Elsevier, vol. 74(1), pages 225-241, January.
    14. Fan, Joseph P H & Lang, Larry H P, 2000. "The Measurement of Relatedness: An Application to Corporate Diversification," The Journal of Business, University of Chicago Press, vol. 73(4), pages 629-660, October.
    15. Breinlich, Holger, 2008. "Trade liberalization and industrial restructuring through mergers and acquisitions," Journal of International Economics, Elsevier, vol. 76(2), pages 254-266, December.
    16. Timothy Bresnahan & Jonathan Levin, 2012. "Vertical Integration and Market Structure [The Handbook of Organizational Economics]," Introductory Chapters,, Princeton University Press.
    17. Pol Antràs, 2014. "Grossman–Hart (1986) Goes Global: Incomplete Contracts, Property Rights, and the International Organization of Production," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 30(suppl_1), pages 118-175.
    18. Guido W. Imbens & Jeffrey M. Wooldridge, 2009. "Recent Developments in the Econometrics of Program Evaluation," Journal of Economic Literature, American Economic Association, vol. 47(1), pages 5-86, March.
    19. Grossman, Sanford J & Hart, Oliver D, 1986. "The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration," Journal of Political Economy, University of Chicago Press, vol. 94(4), pages 691-719, August.
    20. Francine Lafontaine & Margaret Slade, 2007. "Vertical Integration and Firm Boundaries: The Evidence," Journal of Economic Literature, American Economic Association, vol. 45(3), pages 629-685, September.
    21. Philippe Aghion & Rachel Griffith & Peter Howitt, 2006. "Vertical Integration and Competition," American Economic Review, American Economic Association, vol. 96(2), pages 97-102, May.
    22. Buehler Stefan & Schmutzler Armin, 2005. "Asymmetric Vertical Integration," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 5(1), pages 1-27, January.
    23. Paula Bustos, 2011. "Trade Liberalization, Exports, and Technology Upgrading: Evidence on the Impact of MERCOSUR on Argentinian Firms," American Economic Review, American Economic Association, vol. 101(1), pages 304-340, February.
    24. Oliver Hart, 2011. "Thinking about the Firm: A Review of Daniel Spulber's The Theory of the Firm," Journal of Economic Literature, American Economic Association, vol. 49(1), pages 101-113, March.
    25. Alla Lileeva & Daniel Trefler, 2010. "Improved Access to Foreign Markets Raises Plant-level Productivity…For Some Plants," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 125(3), pages 1051-1099.
    26. Justin R. Pierce & Peter K. Schott, 2009. "A Concordance Between Ten-Digit U.S. Harmonized System Codes and SIC/NAICS Product Classes and Industries," NBER Working Papers 15548, National Bureau of Economic Research, Inc.
    27. Philippe Aghion & Richard Holden, 2011. "Incomplete Contracts and the Theory of the Firm: What Have We Learned over the Past 25 Years?," Journal of Economic Perspectives, American Economic Association, vol. 25(2), pages 181-197, Spring.
    28. John McLaren, 2003. "Trade and Market Thickness: Effects on Organizations," Journal of the European Economic Association, MIT Press, vol. 1(2-3), pages 328-336, 04/05.
    29. Claude Menard & Mary M. Shirley (ed.), 2005. "Handbook of New Institutional Economics," Springer Books, Springer, number 978-0-387-25092-2, September.
    30. Aekapol Chongvilaivan & Jung Hur, 2012. "Trade Openness and Vertical Integration: Evidence from the U.S. Manufacturing Sector," Southern Economic Journal, John Wiley & Sons, vol. 78(4), pages 1242-1264, April.
    31. Gene M. Grossman & Elhanan Helpman, 2002. "Integration versus Outsourcing in Industry Equilibrium," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 117(1), pages 85-120.
    32. Bühler, Stefan & Helm, Marco & Lechner, Michael, 2011. "Trade Liberalization and Growth: Plant-Level Evidence from Switzerland," Economics Working Paper Series 1133, University of St. Gallen, School of Economics and Political Science.
    33. Buehler, Stefan & Schmutzler, Armin, 2008. "Intimidating competitors -- Endogenous vertical integration and downstream investment in successive oligopoly," International Journal of Industrial Organization, Elsevier, vol. 26(1), pages 247-265, January.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Burghardt, Dirk, 2013. "The Impact of Trade Policy on Industry Concentration in Switzerland," Economics Working Paper Series 1317, University of St. Gallen, School of Economics and Political Science.
    2. Stiebale, Joel & Vencappa, Dev, 2022. "Import competition and vertical integration: Evidence from India," Journal of Development Economics, Elsevier, vol. 155(C).
    3. Piera Bello & Vincenzo Galasso, 2020. "Old before their time: the role of employers in retirement decisions," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 27(5), pages 1198-1223, October.
    4. Piera Bello & Vincenzo Galasso, 2020. "Old before their time: the role of employers in retirement decisions," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 27(5), pages 1198-1223, October.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Stiebale, Joel & Vencappa, Dev, 2022. "Import competition and vertical integration: Evidence from India," Journal of Development Economics, Elsevier, vol. 155(C).
    2. Altomonte, Carlo & Rungi, Armando, 2013. "Business Groups as Hierarchies of Firms: Determinants of Vertical Integration and Performance," Economy and Society 148920, Fondazione Eni Enrico Mattei (FEEM).
    3. Christopher Hansman & Jonas Hjort & Gianmarco León-Ciliotta & Matthieu Teachout, 2020. "Vertical Integration, Supplier Behavior, and Quality Upgrading among Exporters," Journal of Political Economy, University of Chicago Press, vol. 128(9), pages 3570-3625.
    4. Laura Alfaro & Nicholas Bloom & Paola Conconi & Harald Fadinger & Patrick Legros & Andrew F. Newman & Raffaella Sadun & John Van Reenen, 2017. "Come Together: Firm Boundaries and Delegation," Harvard Business School Working Papers 18-051, Harvard Business School, revised May 2019.
    5. Del Prete, Davide & Rungi, Armando, 2017. "Organizing the global value chain: A firm-level test," Journal of International Economics, Elsevier, vol. 109(C), pages 16-30.
    6. Serfes, Konstantinos, 2013. "A Price Theory of Vertical and Lateral Integration under Two-Sided Productivity Heterogeneity," School of Economics Working Paper Series 2013-6, LeBow College of Business, Drexel University, revised 06 Mar 2014.
    7. Ildikó Magyari, 2017. "Firm Reorganization, Chinese Imports, and US Manufacturing Employment," Working Papers 17-58, Center for Economic Studies, U.S. Census Bureau.
    8. Conconi, Paola & Legros, Patrick & Newman, Andrew F., 2012. "Trade liberalization and organizational change," Journal of International Economics, Elsevier, vol. 86(2), pages 197-208.
    9. Berlingieri, Giuseppe & Pisch, Frank & Steinwender, Claudia, 2018. "Organizing global supply chains: input costs shares and vertical integration," LSE Research Online Documents on Economics 91706, London School of Economics and Political Science, LSE Library.
    10. Giuseppe Berlingieri & Frank Pisch & Claudia Steinwender, 2021. "Organizing Global Supply Chains: Input-Output Linkages and Vertical Integration," Journal of the European Economic Association, European Economic Association, vol. 19(3), pages 1816-1852.
    11. Laura Alfaro & Pol Antràs & Davin Chor & Paola Conconi, 2019. "Internalizing Global Value Chains: A Firm-Level Analysis," Journal of Political Economy, University of Chicago Press, vol. 127(2), pages 508-559.
    12. Eppinger, Peter S. & Kukharskyy, Bohdan, 2017. "Contracting institutions and firm boundaries," University of Tübingen Working Papers in Business and Economics 100, University of Tuebingen, Faculty of Economics and Social Sciences, School of Business and Economics.
    13. Newman, Andrew & Conconi, Paola & Alfaro, Laura & Fadinger, Harald, 2010. "Trade Policy and Firm Boundaries," CEPR Discussion Papers 7899, C.E.P.R. Discussion Papers.
    14. Jamil, Nida & Chaudhry, Theresa Thompson & Chaudhry, Azam, 2022. "Trading textiles along the new silk route: The impact on Pakistani firms of gaining market access to China," Journal of Development Economics, Elsevier, vol. 158(C).
    15. Luigi Pascali, 2009. "Contract Incompleteness, Globalization and Vertical Structure: an Empirical Analysis," Boston College Working Papers in Economics 727, Boston College Department of Economics.
    16. Daron Acemoglu & Philippe Aghion & Rachel Griffith & Fabrizio Zilibotti, 2010. "Vertical Integration and Technology: Theory and Evidence," Journal of the European Economic Association, MIT Press, vol. 8(5), pages 989-1033, September.
    17. Gregory Corcos & Delphine M. Irac & Giordano Mion & Thierry Verdier, 2013. "The Determinants of Intrafirm Trade: Evidence from French Firms," The Review of Economics and Statistics, MIT Press, vol. 95(3), pages 825-838, July.
    18. Filippo Vergara Caffarelli, 2007. "Merge and Compete: Strategic Incentives for Vertical Integration," Rivista di Politica Economica, SIPI Spa, vol. 97(5), pages 203-244, September.
    19. Elhanan Helpman, 2006. "Trade, FDI, and the Organization of Firms," Journal of Economic Literature, American Economic Association, vol. 44(3), pages 589-630, September.
    20. Bühler, Stefan & Helm, Marco & Lechner, Michael, 2011. "Trade Liberalization and Growth: Plant-Level Evidence from Switzerland," Economics Working Paper Series 1133, University of St. Gallen, School of Economics and Political Science.

    More about this item

    Keywords

    Vertical Integration; Hold-up Risk; Theory of the Firm; Globalization; Trade Barriers; Natural Experiment; Plant-Level Data;
    All these keywords.

    JEL classification:

    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • F61 - International Economics - - Economic Impacts of Globalization - - - Microeconomic Impacts
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:usg:econwp:2013:10. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/vwasgch.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.