�The phenomenal CAT�: firms clawing the goods of others

Virginia Di Nino

No 281, Questioni di Economia e Finanza (Occasional Papers) from Bank of Italy, Economic Research and International Relations Area

Abstract: Using results collected for the first time through interviews with Italian manufacturing firms, this work shows that around a quarter of aggregate manufacturing sales are not sold by the actual producer. This circumstance, known as carry along trade (CAT), means that the comparative advantage of some manufacturing firms lies in activities other than crafting, with important consequences for the interpretation of productivity measures. CAT firms hold a 3% productivity premium compared with the average firm, which does not disappear controlling for size, export and multinational status, geographical location and sector. This premium increases to 10% when CAT involves mainly packaging and to 20% when goods produced by third parties are sold under the brand or associated with the brand of CAT firms. Furthermore, CAT firms specializing in downstream activities earn higher profit margins on sourced than on in-house production. CAT can thus be conceived as an example of functional upgrading of some firms towards more valuable downstream activities. Usual productivity measures disregard the CAT phenomenon and bundle a firm�s ability to combine factors within a physical production process with other sources of profitability, such as proximity to consumers, access to foreign markets through well-established distributional channels, and marketing skills. The existence of CAT calls for a methodological refinement of productivity measurement.

Keywords: carry along trade; productivity premia; servicification. (search for similar items in EconPapers)
JEL-codes: F12 F14 L11 (search for similar items in EconPapers)
Date: 2015-07
New Economics Papers: this item is included in nep-eff
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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