Global Production Networks and Imperfect Competition

Hanwei Huang, Kalina Bojidarova Manova, Oscar Ignacio Perello Perez and Frank Pisch

No 14594, IDB Publications (Working Papers) from Inter-American Development Bank

Abstract: How do global production networks and market structure interact to shape the welfare effects of trade and competition policy? We develop a model with two-sided firm heterogeneity, matching frictions, and imperfect supplier competition. More productive buyers match with more suppliers, inducing tougher competition among them, lower input costs, and higher profits. Entry upstream thus benefits primarily high-productivity buyers, while lower trade or matching costs favor mid-productivity buyers. Reduced-form evidence confirms that larger French and Chilean firms import higher quantities at lower prices as more Chinese suppliers enter, and that suppliers charge diversified buyers lower markups. We estimate the model by adapting recent methods for combinatorial, discrete-choice problems. Counterfactuals reveal that the interaction of endogenous networks and markups significantly amplifies the gains from policies that facilitate supplier entry or firm matching, as well as from modern trade agreements that combine trade cost cuts with such policies.

Keywords: Production networks; Matching frictions; Imperfect competition; Gains from trade; Trade; Competition policy (search for similar items in EconPapers)
JEL-codes: D24 F10 F12 F14 L11 L22 (search for similar items in EconPapers)
Date: 2026-05
References: Add references at CitEc
Citations:

Downloads: (external link)
https://publications.iadb.org/publications/english ... fect-Competition.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 403 Forbidden

Related works:
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:idb:brikps:14594

DOI: 10.18235/0014040

Access Statistics for this paper

More papers in IDB Publications (Working Papers) from Inter-American Development Bank Contact information at EDIRC.
Bibliographic data for series maintained by Felipe Herrera Library ().