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Global Value Chains During the Great Trade Collapse: A Bullwhip Effect?

Carlo Altomonte (), Filippo di Mauro (), Gianmarco Ottaviano (), Armando Rungi () and Vincent Vicard

CEP Discussion Papers from Centre for Economic Performance, LSE

Abstract: This paper analyzes the performance of global value chains during the trade collapse. To do so, it exploits a unique transaction-level dataset on French firms containing information on cross-border monthly transactions matched with data on worldwide intra-.rm linkages as defined by property rights (multinational business groups, hierarchies of firms). This newly assembled dataset allows us to distinguish firm-level transactions among two alternative organizational modes of global value chains: internalization of activities (intra- group trade/trade among related parties) or establishment of supply contracts (arm's length trade/trade among unrelated parties). After an overall assessment of the role of global value chains during the trade collapse, we document that intra-group trade in intermediates was characterized by a faster drop followed by a faster recovery than arm's length trade. Amplified fluctuations in terms of trade elasticities by value chains have been referred to as the 'bullwhip effect' and have been attributed to the adjustment of inventories within supply chains. In this paper we first con.rm the existence of such an effect due to trade in inter- mediates, and we underline the role that different organizational modes can play in driving this adjustment.

Keywords: trade collapse; multinational firms; global value chains; hierarchies of firms; vertical integration (search for similar items in EconPapers)
JEL-codes: F23 F15 L22 (search for similar items in EconPapers)
Date: 2012-02
New Economics Papers: this item is included in nep-bec
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Working Paper: Global Value Chains during the Great Trade Collapse: A Bullwhip Effect? (2012) Downloads
Working Paper: Global value chains during the great trade collapse: a bullwhip effect? (2012) Downloads
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