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GVCs and Trade Elasticities with Multistage Production

Robert Johnson () and Andreas Moxnes

No 26018, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We build a quantitative model of trade with multistage manufacturing value chains, which features iceberg trade costs and technology differences across both goods and production stages. We estimate technology and trade costs via the simulated method of moments, matching bilateral shipments of final goods and inputs. Applying the model, we investigate how comparative advantage and trade costs shape the structure of global value chains and trade flows. As the level of trade costs falls, we show that the elasticity of bilateral trade to trade costs increases, due to the endogenous reorganization of value chains (increased export platform production). Surprisingly, however, the elasticity of world trade to trade costs is not magnified by multistage production.

JEL-codes: F1 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-int and nep-ore
Date: 2019-06
Note: ITI
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