Trade and Domestic Production Networks

Felix Tintelnot, Ken Kikkawa, Magne Mogstad and Emmanuel Dhyne

No 25120, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We use Belgian data with information on domestic firm-to-firm sales and foreign trade transactions to study how international trade affects firms' unit cost and the consumer's real wage. We show theoretically that the gains from trade depend on domestic firm-to-firm linkages. Furthermore, we develop a tractable model of endogenous network formation, allowing firm-to-firm connections to form or break in response to import price changes. Quantitatively, we find that for small import price changes, alternative models that assume a roundabout production structure, despite falsely implying that all firms are connected within one link, yield similar predictions for the change in the real wage to the model that fits the actual linkages between firms. For large changes in the price of foreign goods, both the existing network structure and the endogeneity of the connections between firms are found to be quantitatively important.

JEL-codes: E2 F14 L14 (search for similar items in EconPapers)
Date: 2018-10
New Economics Papers: this item is included in nep-int and nep-net
Note: IFM IO ITI PR
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (56)

Published as Emmanuel Dhyne & Ayumu Ken Kikkawa & Magne Mogstad & Felix Tintelnot, 2021. "Trade and Domestic Production Networks," Review of Economic Studies, Oxford University Press, vol. 88(2), pages 643-668.

Downloads: (external link)
http://www.nber.org/papers/w25120.pdf (application/pdf)

Related works:
Journal Article: Trade and Domestic Production Networks (2021)
Working Paper: Trade and Domestic Production Networks (2018)
Working Paper: Trade and Domestic Production Networks (2017)
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:nbr:nberwo:25120

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w25120

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().