The global value chain under imperfect capital markets

Jaerim Choi ()

The World Economy, 2020, vol. 43, issue 2, 484-505

Abstract: This paper develops a model to study how suppliers' financial constraint interact with suppliers' position in a global value chain. I embed financial frictions into the property‐rights model of the global value chain, as in Antràs and Chor (Econometrica, 2013, 81, 2127), to derive the optimal allocation of ownership rights along the global value chain. The model predicts that multinational firms are more likely to integrate downstream intermediate input suppliers in countries with weak financial institutions when the production process is sequential complements. Using US intrafirm trade data for the years 2000–10, together with a triple‐interaction term between "downstreamness" of an industry, demand elasticity of an industry and financial development of a country, I provide empirical evidence that supports the key prediction of the model.

Date: 2020
References: Add references at CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
https://doi.org/10.1111/twec.12897

Related works:
Working Paper: The Global Value Chain under Imperfect Capital Markets (2019)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:worlde:v:43:y:2020:i:2:p:484-505

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0378-5920

Access Statistics for this article

The World Economy is currently edited by David Greenaway

More articles in The World Economy from Wiley Blackwell
Bibliographic data for series maintained by Wiley Content Delivery ().