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Endogenous Spatial Production Networks: Quantitative Implications for Trade and Productivity

Piyush Panigrahi

No 9466, CESifo Working Paper Series from CESifo

Abstract: I develop a model of endogenous production network formation between spatially distant firms. Unlike other such models, it is tractable even for very large numbers of firms, that is, it delivers closed-form predictions for firm-to-firm trade, it can be estimated via maximum likelihood, and it can be used for firm-level counterfactual analysis. I exploit novel micro-data on Indian firm-to-firm production networks for estimation. The estimated model implies that upon market integration across Indian states, over half of the variation in changes in firms’ sales to other firms can be explained by endogenous changes in network structure.

Keywords: production networks; international trade; economic geography (search for similar items in EconPapers)
JEL-codes: C67 C68 D24 D85 F11 F12 L11 O11 O12 R12 R15 (search for similar items in EconPapers)
Date: 2021
New Economics Papers: this item is included in nep-bec, nep-geo, nep-int, nep-net and nep-ure
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