Groups and Trade in East Asia: Part 1, Networked Equilibria

Michael Magill, Robert Feenstra, Deng-Shing Huang, Gary G. Hamilton and Kristin Van Gaasback
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Kristin Van Gaasback: Department of Economics, University of California Davis

No 15, Working Papers from University of California, Davis, Department of Economics

Abstract: We propose an economic model of business groups that allows for the cooperative behavior of groups of firms, where the number and size of each group is determined endogenously. In this framework, more than one configuration of groups that can arise in equilibrium: several different types of business groups can occur, each of which are consistent with profit-maximization and are stable. This means that the economic logic does not fully determine the industrial structure, leaving scope for political and sociological factors to have a lasting influence. In a companion paper , we argue that the differing structures of business groups found in South Korea, Taiwan and Japan fit the stylized results from the model, and contrast the impact of these groups on the product variety of their country exports to the United States

Date: 2003-01-07
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Working Paper: GROUPS AND TRADE IN EAST ASIA: PART 1, NETWORKED EQUILIBRIA
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