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A Matching Theory of Global Supply Chains

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  • SUGITA, Yoichi

Abstract

This paper develops a simple general equilibrium model of global supply chains (GSCs) that jointly addresses three key decisions of firms forming GSCs, namely selection (whether to form a GSC), location (where to find GSC partners), and matching (with which firms to form a GSC). The model develops a Becker type assortative matching model of final producers and suppliers both of which are heterogeneous in capability (productivity/quality) of their tasks, and integrates it with a Melitz type model of selection and a Ricardian comparative advantage model of location. The model presents a new mechanism of gains from trade associated with firm heterogeneity. Namely, trade liberalization causes rematching of firms toward positive assortative matching at the world level as a recent empirical study on exporter-importer matching data observes.

Suggested Citation

  • SUGITA, Yoichi, 2017. "A Matching Theory of Global Supply Chains," Discussion paper series HIAS-E-62, Hitotsubashi Institute for Advanced Study, Hitotsubashi University.
  • Handle: RePEc:hit:hiasdp:hias-e-62
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    References listed on IDEAS

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    More about this item

    Keywords

    Global supply chains; firm heterogeneity; two-sided heterogeneity; matching; trade in intermediate goods; quality differentiation;

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation

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