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Vertical Integration, Supplier Behavior, and Quality Upgrading among Exporters

Author

Listed:
  • Hansman, Christopher
  • Hjort, Jonas
  • Le�n, Gianmarco
  • Teachout, Matthieu

Abstract

We study the relationship between exporters' organizational structure and output quality. If only input quantity is observable, theory predicts that vertical integration may be necessary to incentivize suppliers to increase input quality. Using data on suppliers' behavior, supplier ownership, supply transactions, and manufacturers' output by quality grade and exports from the Peruvian fishmeal industry, we show the following. After integrating with the plant being supplied and losing access to alternative pay-per-kilo buyers, suppliers take more quality-increasing and less quantity-increasing actions. Integration consequently causally increases output quality, and manufacturers integrate suppliers when facing high relative demand for high quality grades.

Suggested Citation

  • Hansman, Christopher & Hjort, Jonas & Le�n, Gianmarco & Teachout, Matthieu, 2017. "Vertical Integration, Supplier Behavior, and Quality Upgrading among Exporters," CEPR Discussion Papers 12518, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:12518
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    Cited by:

    1. repec:eee:reveco:v:53:y:2018:i:c:p:160-167 is not listed on IDEAS
    2. Hansman, Christopher & Hjort, Jonas & León, Gianmarco, 2018. "Interlinked Firms and the Consequences of Piecemeal Regulation," CEPR Discussion Papers 12584, C.E.P.R. Discussion Papers.

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    JEL classification:

    • D2 - Microeconomics - - Production and Organizations
    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development

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