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Trade and Domestic Production Networks

Emmanuel Dhyne, Ken Kikkawa, Magne Mogstad and Felix Tintelnot

The Review of Economic Studies, 2021, vol. 88, issue 2, 643-668

Abstract: We examine how many and what kind of firms ultimately rely on foreign inputs, sell to foreign markets, and are affected by trade shocks. To capture that firms can trade indirectly by buying from or selling to domestic firms that import or export, we use Belgian data with information on both domestic firm-to-firm sales and foreign trade transactions. We find that most firms use a lot of foreign inputs, but only a small number of firms show that dependence through direct imports. While direct exporters are rare, a majority of firms are indirectly exporting. In most firms, however, indirect export is quantitatively modest, and sales at home are the key source of revenue. We show that what matters for the transmission of foreign demand shocks to a firm’s revenue is how much the firm ultimately sells to foreign markets, not whether these sales are from direct or indirect export.

Keywords: Production Networks; International Trade; F14; L14 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (34)

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Working Paper: Trade and Domestic Production Networks (2018) Downloads
Working Paper: Trade and Domestic Production Networks (2018) Downloads
Working Paper: Trade and Domestic Production Networks (2017) Downloads
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The Review of Economic Studies is currently edited by Thomas Chaney, Xavier d’Haultfoeuille, Andrea Galeotti, Bård Harstad, Nir Jaimovich, Katrine Loken, Elias Papaioannou, Vincent Sterk and Noam Yuchtman

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