Firm Heterogeneity and Imperfect Competition in Global Production Networks

Hanwei Huang, Kalina Manova, Oscar Perelló, Frank Pisch and Kalina B. Manova
Authors registered in the RePEc Author Service: Kalina Manova

No 11302, CESifo Working Paper Series from CESifo

Abstract: We study the role of firm heterogeneity and imperfect competition for global production networks and the gains from trade. We develop a quantifiable trade model with two-sided firm heterogeneity, matching frictions, and oligopolistic competition upstream. More productive buyers endogenously match with more suppliers, thereby inducing tougher competition among them to enjoy lower input costs and superior performance. Transaction-level customs data confirms that downstream French and Chilean firms import higher values and quantities at lower prices as upstream Chinese markets become more competitive over time, with stronger responses by larger firms. Moreover, suppliers charge more diversified buyers lower mark-ups. Counterfactual analysis indicates that entry upstream benefits high-productivity buyers, while lower matching or trade costs benefit all buyers, with the biggest boost to mid-productivity buyers. All three shocks generate sizeable welfare gains, especially under package reforms. Global production networks thus mediate bigger effects and cross-border spillovers from industrial and trade policies.

Keywords: production networks; global value chains; matching frictions; imperfect competition; gains from trade (search for similar items in EconPapers)
JEL-codes: D24 F10 F12 F14 L11 L22 (search for similar items in EconPapers)
Date: 2024
New Economics Papers: this item is included in nep-bec, nep-com, nep-gth and nep-int
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://www.cesifo.org/DocDL/cesifo1_wp11302.pdf (application/pdf)

Related works:
Working Paper: Firm heterogeneity and imperfect competition in global production networks (2024)
Working Paper: Firm Heterogeneity and Imperfect Competition in Global Production Networks (2024)
Working Paper: Firm heterogeneity and imperfect competition in global production networks (2024)
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:ces:ceswps:_11302

Access Statistics for this paper

More papers in CESifo Working Paper Series from CESifo Contact information at EDIRC.
Bibliographic data for series maintained by Klaus Wohlrabe ().