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Global value chains during the great trade collapse: a bullwhip effect?

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Listed author(s):
  • di Mauro, Filippo
  • Ottaviano, Gianmarco I.P.
  • Vicard, Vincent
  • Altomonte, Carlo
  • Rungi, Armando

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 intrafirm 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 (intragroup 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 confirm the existence of such an effect due to trade in intermediates, and we underline the role that different organizational modes can play in driving this adjustment. JEL Classification: F23, F15, L22

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Paper provided by European Central Bank in its series Working Paper Series with number 1412.

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Date of creation: Jan 2012
Handle: RePEc:ecb:ecbwps:20121412
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Keywords: global value chains; hierarchies of firms; integration; Multinational firms; trade collapse; vertical;

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Find related papers by JEL classification:
  • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
  • F15 - International Economics - - Trade - - - Economic Integration
  • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure

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  1. Kaplinsky, Raphael & Farooki, Masuma, 2010. "What are the implications for global value chains when the market shifts from the north to the south ?," Policy Research Working Paper Series 5205, The World Bank.
  2. Andrew B. Bernard & Marco Grazzi & Chiara Tomasi, 2010. "Intermediaries in International Trade: direct versus indirect modes of export," LEM Papers Series 2010/19, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
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  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. Maria Bas & Juan Carluccio, 2009. "Wage bargaining and the boundaries of the multinational firm," LSE Research Online Documents on Economics 28700, London School of Economics and Political Science, LSE Library.
  9. 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.
  10. Olivier Cattaneo & Gary Gereffi & Cornelia Staritz, 2010. "Global Value Chains in a Postcrisis World : A Development Perspective," World Bank Publications, The World Bank, number 2509, June.
  11. 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.
  12. Sébastien Miroudot & Rainer Lanz & Alexandros Ragoussis, 2009. "Trade in Intermediate Goods and Services," OECD Trade Policy Papers 93, OECD Publishing.
  13. Escaith, Hubert & Lindenberg, Nannette & Miroudot, Sébastien, 2010. "International supply chains and trade elasticity in times of global crisis," WTO Staff Working Papers ERSD-2010-08, World Trade Organization (WTO), Economic Research and Statistics Division.
  14. Pol Antràs, 2005. "Property Rights and the International Organization of Production," American Economic Review, American Economic Association, vol. 95(2), pages 25-32, May.
  15. Abdul d Abiad & Petia Topalova & Prachi Mishra, 2011. "How Does Trade Evolve in the Aftermath of Financial Crises?," IMF Working Papers 11/3, International Monetary Fund.
  16. George Alessandria & Joseph P. Kaboski & Virgiliu Midrigan, 2011. "US Trade and Inventory Dynamics," American Economic Review, American Economic Association, vol. 101(3), pages 303-307, May.
  17. Freund, Caroline, 2009. "The trade response to global downturns : historical evidence," Policy Research Working Paper Series 5015, The World Bank.
  18. Rainer Lanz & Sébastien Miroudot, 2011. "Intra-Firm Trade: Patterns, Determinants and Policy Implications," OECD Trade Policy Papers 114, OECD Publishing.
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