An Elementary Theory of Global Supply Chains

Arnaud Costinot, Jonathan Vogel and Su Wang

No 16936, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper develops an elementary theory of global supply chains. We consider a world economy with an arbitrary number of countries, one factor of production, a continuum of intermediate goods, and one final good. Production of the final good is sequential and subject to mistakes. In the unique free trade equilibrium, countries with lower probabilities of making mistakes at all stages specialize in later stages of production. Because of the sequential nature of production, absolute productivity differences are a source of comparative advantage among nations. Using this simple theoretical framework, we offer a first look at how vertical specialization shapes the interdependence of nations.

JEL-codes: F1 (search for similar items in EconPapers)
Date: 2011-04
New Economics Papers: this item is included in nep-int
Note: ITI
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Citations: View citations in EconPapers (16)

Published as Arnaud Costinot & Jonathan Vogel & Su Wang, 2013. "An Elementary Theory of Global Supply Chains," Review of Economic Studies, Oxford University Press, vol. 80(1), pages 109-144.

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Related works:
Journal Article: An Elementary Theory of Global Supply Chains (2013)
Working Paper: An Elementary Theory of Global Supply Chains (2011)
Working Paper: An Elementary Theory of Global Supply Chains (2011)
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