IDEAS home Printed from https://ideas.repec.org/a/eee/inecon/v145y2023ics0022199623001277.html
   My bibliography  Save this article

Endogenous production networks with fixed costs

Author

Listed:
  • Dhyne, Emmanuel
  • Kikkawa, Ayumu Ken
  • Kong, Xianglong
  • Mogstad, Magne
  • Tintelnot, Felix

Abstract

We develop a model of endogenous production networks with fixed costs in the formation of links between firms. We show that the closed economy equilibrium is unique if the set of feasible networks consists only of networks that are acyclic and the buyer initiates the link formation while having full bargaining power in price negotiations with the supplier. We provide examples of multiple equilibria if the supplier initiates the link formation in both cyclic and acyclic feasible networks or if the buyer initiates the link formation in a cyclic production network. We take the acyclic production network model to Belgian data on firm-to-firm production networks and show that it matches well the salient features of the network. The model generates substantial churn in domestic firm-to-firm linkages in response to trade shocks, while delivering only moderately different welfare changes compared to a model with fixed linkages.

Suggested Citation

  • Dhyne, Emmanuel & Kikkawa, Ayumu Ken & Kong, Xianglong & Mogstad, Magne & Tintelnot, Felix, 2023. "Endogenous production networks with fixed costs," Journal of International Economics, Elsevier, vol. 145(C).
    • Handle: RePEc:eee:inecon:v:145:y:2023:i:c:s0022199623001277
    DOI: 10.1016/j.jinteco.2023.103841
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0022199623001277
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.jinteco.2023.103841?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    Citations

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


    Cited by:

    1. Matthias Fauth & Benjamin Jung & Wilhelm Kohler, 2023. "German Firms in International Trade: Evidence from Recent Microdata," CESifo Working Paper Series 10523, CESifo.

    More about this item

    Keywords

    Production networks; Endogenous network formation;

    JEL classification:

    • E0 - Macroeconomics and Monetary Economics - - General
    • F1 - International Economics - - Trade

    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:eee:inecon:v:145:y:2023:i:c:s0022199623001277. 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.

    We have no bibliographic references for this item. You can help adding them by using 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: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/505552 .

    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.