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Trade and Domestic Production Networks

Author

Listed:
  • Magne Mogstad

    (University of Chicago)

  • Emmanuel Dhyne

    (National Bank of Belgium)

  • Ayumu Kikkawa

    (University of Chicago)

  • Felix Tintelnot

    (University of Chicago)

Abstract

In this paper we study how international trade affects firm efficiency and real wages in Belgium. Both in our theory and observed data firms trade with each other and external shocks transmit along the firm-to-firm production network. We first document the transmission of external trade shocks in reduced-form equations based on an exogenous network structure. We then develop and estimate a model of firm-to-firm trade, external trade, and endogenous network formation.

Suggested Citation

  • Magne Mogstad & Emmanuel Dhyne & Ayumu Kikkawa & Felix Tintelnot, 2017. "Trade and Domestic Production Networks," 2017 Meeting Papers 381, Society for Economic Dynamics.
  • Handle: RePEc:red:sed017:381
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    Cited by:

    1. 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.
    2. Vasco M. Carvalho & Alireza Tahbaz-Salehi, 2019. "Production Networks: A Primer," Annual Review of Economics, Annual Reviews, vol. 11(1), pages 635-663, August.
    3. Andrew B. Bernard & Andreas Moxnes, 2018. "Networks and Trade," Annual Review of Economics, Annual Reviews, vol. 10(1), pages 65-85, August.
    4. Jean Imbs & Laurent L. Pauwels, 2020. "High Order Openness," Working Papers 20200047, New York University Abu Dhabi, Department of Social Science, revised Jun 2020.
    5. Robert C. Johnson, 2018. "Measuring Global Value Chains," Annual Review of Economics, Annual Reviews, vol. 10(1), pages 207-236, August.
    6. Akgündüz, Yusuf Emre & Torun, Huzeyfe, 2020. "Two and a half million Syrian refugees, tasks and capital intensity," Journal of Development Economics, Elsevier, vol. 145(C).
    7. Esposito, Federico, 2019. "Demand Risk and Diversification through Trade," MPRA Paper 99875, University Library of Munich, Germany.
    8. Muscillo, Alessio & Pin, Paolo & Razzolini, Tiziano & Serti, Francesco, 2018. "Does "Network Closure" Beef up Import Premium?," IZA Discussion Papers 12036, Institute of Labor Economics (IZA).
    9. Defever, Fabrice & Imbruno, Michele & Kneller, Richard, 2020. "Trade liberalization, input intermediaries and firm productivity: Evidence from China," Journal of International Economics, Elsevier, vol. 126(C).
    10. Johannes Boehm & Ezra Oberfield, 2020. "Misallocation in the Market for Inputs: Enforcement and the Organization of Production," The Quarterly Journal of Economics, Oxford University Press, vol. 135(4), pages 2007-2058.
    11. LI Zhigang & WEI Shang-Jin & ZHANG Hongyong, 2018. "Production Chains, Exchange Rate Shocks, and Firm Performance," Discussion papers 18058, Research Institute of Economy, Trade and Industry (RIETI).
    12. Georgiadis, Georgios & Gräb, Johannes & Khalil, Makram, 2019. "Global value chain participation and exchange rate pass-through," Working Paper Series 2327, European Central Bank.
    13. Esposito, Federico, 2020. "Demand Risk and Diversification through International Trade," MPRA Paper 100865, University Library of Munich, Germany.
    14. Taiji Furusawa & Tomohiko Inui & Keiko Ito & Heiwai Tang, 2017. "Global Sourcing and Domestic Production Networks," CESifo Working Paper Series 6658, CESifo.
    15. David Baqaee & Emmanuel Farhi, 2019. "Networks, Barriers, and Trade," NBER Working Papers 26108, National Bureau of Economic Research, Inc.
    16. Cosimo Beverelli & Victor Stolzenburg & Robert B. Koopman & Simon Neumueller, 2019. "Domestic value chains as stepping stones to global value chain integration," The World Economy, Wiley Blackwell, vol. 42(5), pages 1467-1494, May.
    17. Kun Jiang & Wolfgang Keller & Larry D. Qiu & William Ridley, 2018. "International Joint Ventures and Internal vs. External Technology Transfer: Evidence from China," CESifo Working Paper Series 7065, CESifo.
    18. Tang, Heiwai & Wang, Fei & Wang, Zhi, 2020. "Domestic segment of global value chains in China under state capitalism✰," Journal of Comparative Economics, Elsevier, vol. 48(4), pages 797-821.
    19. Daron Acemoglu & Pablo D. Azar, 2020. "Endogenous Production Networks," Econometrica, Econometric Society, vol. 88(1), pages 33-82, January.
    20. Emmanuel Dhyne & Glenn Magerman & Ayumu Ken kikkawa, 2019. "Imperfect Competition in Firm-to-Firm Trade," Working Papers ECARES 2019-05, ULB -- Universite Libre de Bruxelles.
    21. Cynthia Kinnan & Krislert Samphantharak & Robert Townsend & Diego Vera-Cossio, 2019. "Insurance and Propagation in Village Networks," PIER Discussion Papers 115, Puey Ungphakorn Institute for Economic Research, revised Sep 2019.
    22. Kirill Borusyak & Xavier Jaravel, 2018. "The Distributional Effects of Trade: Theory and Evidence from the United States," 2018 Meeting Papers 284, Society for Economic Dynamics.
    23. Cédric Duprez & Glenn Magerman, 2019. "Price Updating with Production Networks," Working Papers ECARES 2019-07, ULB -- Universite Libre de Bruxelles.
    24. Masahiro Endoh, 2020. "The Impact of Firms' International Trade on Domestic Suppliers," Keio-IES Discussion Paper Series 2020-016, Institute for Economics Studies, Keio University.

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    More about this item

    JEL classification:

    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation

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