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Globalization and Vertical Structure: An Empirical Investigation

  • Buehler, Stefan

    ()

  • Burghardt, Dirk

    ()

This paper studies the effect of trade facilitation on vertical firm structure using plant-level data from Switzerland. Based on the Business Census and the Input-Output table, we first calculate a binary measure of vertical integration for all plants registered in Switzerland. We then estimate the effect of a Mutual Recognition Agreement with the European Union on the plants' probability of being vertically integrated. Adopting a difference-in-differences approach, we find that this policy change reduced the treated plants' probability of being vertically integrated by about 10 percent. Our results are consistent with recent work in international trade theory.

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File URL: http://ux-tauri.unisg.ch/RePEc/usg/econwp/EWP-1310.pdf
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Paper provided by University of St. Gallen, School of Economics and Political Science in its series Economics Working Paper Series with number 1310.

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Length: 33 pages
Date of creation: Mar 2013
Handle: RePEc:usg:econwp:2013:10
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  1. Nina Pavcnik, 2002. "Trade Liberalization, Exit, and Productivity Improvements: Evidence from Chilean Plants," Review of Economic Studies, Oxford University Press, vol. 69(1), pages 245-276.
  2. Daron Acemoglu & Philippe Aghion & Rachel Griffith & Fabrizio Zilibotti, 2010. "Vertical Integration and Technology: Theory and Evidence," Journal of the European Economic Association, MIT Press, vol. 8(5), pages 989-1033, 09.
  3. Ali Hortaçsu & Chad Syverson, 2007. "Cementing Relationships: Vertical Integration, Foreclosure, Productivity, and Prices," Journal of Political Economy, University of Chicago Press, vol. 115, pages 250-301.
  4. Guido Imbens & Jeffrey Wooldridge, 2008. "Recent developments in the econometrics of program evaluation," CeMMAP working papers CWP24/08, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
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  7. Stefan Buehler & Justus Haucap, 2003. "Strategic Outsourcing Revisited," SOI - Working Papers 0305, Socioeconomic Institute - University of Zurich.
  8. Amiti, Mary & Konings, Jozef, 2005. "Trade Liberalization, Intermediate Inputs and Productivity: Evidence from Indonesia," CEPR Discussion Papers 5104, C.E.P.R. Discussion Papers.
  9. Justin Pierce & Peter Schott, 2009. "A Concordance Between Ten-Digit U.S. Harmonized System Codes and SIC/NAICS Product Classes and Industries," Working Papers 09-41, Center for Economic Studies, U.S. Census Bureau.
  10. Pol Antràs, 2014. "Grossman–Hart (1986) Goes Global: Incomplete Contracts, Property Rights, and the International Organization of Production," Journal of Law, Economics and Organization, Oxford University Press, vol. 30(suppl_1), pages i118-i175.
  11. Alla Lileeva & Daniel Trefler, 2010. "Improved Access to Foreign Markets Raises Plant-level Productivity…For Some Plants," The Quarterly Journal of Economics, Oxford University Press, vol. 125(3), pages 1051-1099.
  12. Philippe Aghion & Richard Holden, 2011. "Incomplete Contracts and the Theory of the Firm: What Have We Learned over the Past 25 Years?," Journal of Economic Perspectives, American Economic Association, vol. 25(2), pages 181-197, Spring.
  13. Buehler, Stefan & Schmutzler, Armin, 2008. "Intimidating competitors -- Endogenous vertical integration and downstream investment in successive oligopoly," International Journal of Industrial Organization, Elsevier, vol. 26(1), pages 247-265, January.
  14. Grossman, Sanford J & Hart, Oliver, 1985. "The Cost and Benefits of Ownership: A Theory of Vertical and Lateral Integration," CEPR Discussion Papers 70, C.E.P.R. Discussion Papers.
  15. Daniel Trefler, 2004. "The Long and Short of the Canada-U. S. Free Trade Agreement," American Economic Review, American Economic Association, vol. 94(4), pages 870-895, September.
  16. Richard Blundell & Mónica Costa Dias, 2008. "Alternative Approaches to Evaluation in Empirical Microeconomics," CEF.UP Working Papers 0805, Universidade do Porto, Faculdade de Economia do Porto.
  17. Timothy Bresnahan & Jonathan Levin, 2012. "Vertical Integration and Market Structure," Introductory Chapters, in: Robert Gibbons & John Roberts (ed.), The Handbook of Organizational Economics Princeton University Press.
  18. Laura Alfaro & Paola Conconi & Harald Fadinger & Andrew F. Newman, 2010. "Do Prices Determine Vertical Integration? Evidence from Trade Policy," Harvard Business School Working Papers 10-060, Harvard Business School, revised May 2013.
  19. Gene M. Grossman & Elhanan Helpman, 2002. "Integration versus Outsourcing in Industry Equilibrium," The Quarterly Journal of Economics, Oxford University Press, vol. 117(1), pages 85-120.
  20. Marin, Dalia, 2012. "The Theory of the Firm goes Global," CEPR Discussion Papers 8880, C.E.P.R. Discussion Papers.
  21. Holger Breinlich, 2006. "Trade liberalization and industrial restructuring through mergers and acquisitions," LSE Research Online Documents on Economics 19868, London School of Economics and Political Science, LSE Library.
  22. Paula Bustos, 2011. "Trade Liberalization, Exports, and Technology Upgrading: Evidence on the Impact of MERCOSUR on Argentinian Firms," American Economic Review, American Economic Association, vol. 101(1), pages 304-340, February.
  23. Stefan Buehler & Armin Schmutzler, 2003. "Asymmetric Vertical Integration," SOI - Working Papers 0306, Socioeconomic Institute - University of Zurich, revised Nov 2004.
  24. Michael D. Whinston, 2001. "Assessing the Property Rights and Transaction-Cost Theories of Firm Scope," American Economic Review, American Economic Association, vol. 91(2), pages 184-188, May.
  25. Fan, Joseph P H & Lang, Larry H P, 2000. "The Measurement of Relatedness: An Application to Corporate Diversification," The Journal of Business, University of Chicago Press, vol. 73(4), pages 629-60, October.
  26. Bühler, Stefan & Helm, Marco & Lechner, Michael, 2011. "Trade Liberalization and Growth: Plant-Level Evidence from Switzerland," Economics Working Paper Series 1133, University of St. Gallen, School of Economics and Political Science.
  27. Francine Lafontaine & Margaret Slade, 2007. "Vertical Integration and Firm Boundaries: The Evidence," Journal of Economic Literature, American Economic Association, vol. 45(3), pages 629-685, September.
  28. Philippe Aghion & Rachel Griffith & Peter Howitt, 2006. "Vertical Integration and Competition," American Economic Review, American Economic Association, vol. 96(2), pages 97-102, May.
  29. John McLaren, 2003. "Trade and Market Thickness: Effects on Organizations," Journal of the European Economic Association, MIT Press, vol. 1(2-3), pages 328-336, 04/05.
  30. Aekapol Chongvilaivan & Jung Hur, 2012. "Trade Openness and Vertical Integration: Evidence from the U.S. Manufacturing Sector," Southern Economic Journal, Southern Economic Association, vol. 78(4), pages 1242-1264, April.
  31. Ornelas, Emanuel & Turner, John L., 2008. "Trade liberalization, outsourcing, and the hold-up problem," Journal of International Economics, Elsevier, vol. 74(1), pages 225-241, January.
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