Results 1 -
7 of
7
Firms and Credit Constraints along the Global Value Chain: Processing Trade in China
, 2013
"... Abstract. Global value chains allow firms to not only trade in final goods, but to also conduct intermediate stages of production by processing imported inputs for re-exporting. This paper examines how financial constraints determine companies ’ position in global supply chains, and how this choice ..."
Abstract
-
Cited by 10 (2 self)
- Add to MetaCart
(Show Context)
Abstract. Global value chains allow firms to not only trade in final goods, but to also conduct intermediate stages of production by processing imported inputs for re-exporting. This paper examines how financial constraints determine companies ’ position in global supply chains, and how this choice affects profitability. We exploit matched customs and balance-sheet data from China, where exports are classified as ordinary trade, import-and-assembly processing trade (processing firm pays for imported inputs), and pure-assembly processing trade (processing firm receives foreign inputs for free). We establish two main results. First, profits, profitability and value added fall as exporters orient sales from ordinary towards processing trade, and from import-and-assembly towards pure assembly. Second, less financially constrained firms perform more ordinary trade relative to processing trade, and more import-and-assembly relative to pure assembly. We rationalize these patterns with a model that incorporates credit constraints and imperfect contractibility in companies ’ export decisions. Our results imply that global production networks allow more firms in developing countries to share in the gains from trade- firms that could otherwise not transact internationally. However, limited access to capital restricts firms to low value-added stages of the supply chain and precludes them from pursuing more profitable opportunities. Financial frictions thus affect the organization of production across firm
Evidence from Trade Policy ∗
, 2012
"... Working papers are in draft form. This working paper is distributed for purposes of comment and discussion only. It may not be reproduced without permission of the copyright holder. Copies of working ..."
Abstract
- Add to MetaCart
(Show Context)
Working papers are in draft form. This working paper is distributed for purposes of comment and discussion only. It may not be reproduced without permission of the copyright holder. Copies of working
Forthcoming, Review of Economic Studies Do Prices Determine Vertical Integration? ∗
, 2015
"... A number of theories in organizational economics and industrial organization suggest that vertical integration, while costly, increases productivity. It follows from firms ’ maxi-mizing behavior that higher prices in the product market ought to induce more integration. Trade policy provides a source ..."
Abstract
- Add to MetaCart
(Show Context)
A number of theories in organizational economics and industrial organization suggest that vertical integration, while costly, increases productivity. It follows from firms ’ maxi-mizing behavior that higher prices in the product market ought to induce more integration. Trade policy provides a source of exogenous price variation to assess this prediction: higher tariffs should lead to higher prices and therefore to more integration. We construct firm-level vertical integration indices for a large set of countries and industries and exploit variation in applied MFN tariffs to examine the impact of tariffs on firm boundaries. The empirical results provide strong support for the view that higher output prices generate more vertical integration. Our estimates of the average price elasticity of vertical integra-tion are in the range 0.4-2.
Keywords: Strategic trade policy
, 2015
"... We consider the purpose and design of trade agreements in imperfectly competitive environments featuring firm-delocation effects. In both the segmented-market Cournot an international reduce the world s terms of trade; s, if governments e equilibrium is ance the welfare 995) to include only if gover ..."
Abstract
- Add to MetaCart
We consider the purpose and design of trade agreements in imperfectly competitive environments featuring firm-delocation effects. In both the segmented-market Cournot an international reduce the world s terms of trade; s, if governments e equilibrium is ance the welfare 995) to include only if governments are motivated by the terms-of-trade implications of their respective trade policies. This finding also
REVISITING TRADE AND DEVELOPMENT NEXUS What Global Fragmentation Means for the WTO: Article XXIV, Behind-the-Border Concessions, and A New Case for WTO Limits on Investment Incentives
, 2013
"... Disclaimer: This is a working paper, and hence it represents research in progress. This paper represents the personal opinions of individual staff members and/or external contributors, and is not meant to represent the position or opinions of the WTO or its Members, nor the official position of any ..."
Abstract
- Add to MetaCart
Disclaimer: This is a working paper, and hence it represents research in progress. This paper represents the personal opinions of individual staff members and/or external contributors, and is not meant to represent the position or opinions of the WTO or its Members, nor the official position of any staff members. Any errors are the fault of the authors. Copies of working papers can be requested from the divisional secretariat by writing to: Economic Research and Statistics Division,
Do Prices Determine Vertical Integration?∗
, 2014
"... What is the relationship between product prices and vertical integration? While the litera-ture has focused on how integration affects prices, this paper provides evidence that prices can affect integration. Many theories in organizational economics and industrial organi-zation posit that integratio ..."
Abstract
- Add to MetaCart
(Show Context)
What is the relationship between product prices and vertical integration? While the litera-ture has focused on how integration affects prices, this paper provides evidence that prices can affect integration. Many theories in organizational economics and industrial organi-zation posit that integration, while costly, increases productivity. It follows from firms’ maximizing behavior that higher prices induce more integration. The reason is that at low prices, increases in revenue resulting from enhanced productivity are too small to justify the cost, whereas at high prices the revenue benefit exceeds the cost. Trade policy pro-vides a source of exogenous price variation to assess the validity of this prediction: higher tariffs should lead to higher prices and therefore to more integration. We construct firm-level indices of vertical integration for a large set of countries and industries and exploit cross-section and time-series variation in import tariffs to examine their impact on firm boundaries. Our empirical results provide strong support for the view that output prices are a key determinant of vertical integration.
TRADE INTERCONNECTEDNESS: THE WORLD WITH GLOBAL VALUE CHAINS EXECUTIVE SUMMARY
, 2013
"... Evidence based on the World Input-Output Database (WIOD), which became available in May 2012, shows that global value chains (GVCs) are creating more and more of world income, including labor income. This is by no means limited to manufacturing; indeed more income is generated by exporting services ..."
Abstract
- Add to MetaCart
Evidence based on the World Input-Output Database (WIOD), which became available in May 2012, shows that global value chains (GVCs) are creating more and more of world income, including labor income. This is by no means limited to manufacturing; indeed more income is generated by exporting services within GVCs. Moreover, the fragmentation of the production process across different countries has led to a strong trade-investment nexus. Data at the individual country level indicate that being part of GVCs is associated with a higher growth rate since the mid-1990s. The emergence and growth of GVCs have important implications for the Fund’s surveillance work, in particular on measuring competitiveness, or the real effective exchange rate (REER). The standard REER computed at the Fund is based on the assumption that goods traded are final goods only. Given that trade in intermediate goods is now more than two thirds of total trade, this may be problematic. For example, it does not account for the fact that a nominal appreciation not only makes goods more expensive to sell, but also makes intermediate inputs cheaper to import. One approach to account for GVCs is to modify the formula so that changes in intermediate inputs
