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A Coasian Model of International Production Chains

Thibault Fally () and Russell Hillberry

No 13062, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: International supply chains require coordination of numerous activities across multiple countries and firms. We adapt a model of supply chains and apply it to an international trade setting. In each chain, the measure of tasks completed within a firm is determined by a tradeoff between transaction costs and diseconomies of scope linked to management of a larger measure of tasks within the firm. The structural parameters that determine firm scope explain variation in supply-chain length and gross-output-to-value-added ratios, and determine countries' comparative advantage along and across supply chains. We calibrate the model to match key observables in East Asia, and evaluate implications of changes in model parameters for trade, welfare, the length of supply chains and countries' relative position within them.

Keywords: Boundary of the firm; Fragmentation of production; Trade in intermediate goods; transaction costs (search for similar items in EconPapers)
JEL-codes: F10 L23 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-bec and nep-int
Date: 2018-07
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Journal Article: A Coasian model of international production chains (2018) Downloads
Working Paper: A Coasian Model of International Production Chains (2017) Downloads
Working Paper: A Coasian Model of International Production Chains (2015) Downloads
Working Paper: A Coasian Model of International Production Chains (2015) Downloads
Working Paper: A Coasian model of international production chains (2015) Downloads
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