Specialization is a powerful source of productivity gains, but how production networks at the industry level are related to aggregate productivity in the data is an open question. We construct a database of input-output tables covering a broad spectrum of countries and times, develop a theoretical framework to derive an econo-metric specification, and document a strong and robust relationship between the strength of industry linkages and aggregate productivity. We then calibrate a multi-sector neoclassical model and use alternative identification assumptions to extract an industry-level measure of distortions in intermediate input choices. We com-pute the aggregate losses from these distortions for each country in our sample and find that they are quantitatively consistent with the relationship between indus-try linkages and aggregate productivity in the data. Our estimates imply that the TFP gains from eliminating these distortions are modest but significant, averaging roughly 10 % for middle and low income countries.

part by the governments of Norway, Sweden, and the United Kingdom through the Multidonor Trust Fund for Trade and Development. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research. NBER working papers are circulated for discussion and comment purposes. They have not been peer-reviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications.

Abstract This paper investigates the productivity effects of importing in an application with a volatile exchange rate. I find that importing industries have large gains in revenue productivity which is consistent with cost decreases from importing a larger variety of inputs. It provides a mechanism for the results in Weinberger

Abstract International supply chains require coordination of numerous activities across multiple countries and firms. We develop a theoretical model in which the optimal organization of a supply chain involves a series of linked decisions that equate, at the margin, (domestic or international) transaction costs and the costs of coordinating more tasks within the firm. The parameters that govern the two types of costs explain variation in supply chain length as well as cross-country variation in gross output-to-value added ratios. Comparative advantage within chains depends solely on the coordination cost parameter. Conditional on participation in a chain, countries with lower coordination costs locate downstream. Within a chain, domestic transaction costs only affect countries' absolute advantage, but a country with large transaction costs tends to specialize in those chains for which its coordination costs are especially low. We provide an analytical treatment of trade and welfare responses to trade cost change in a simple two-country model. To explore the model's implications in a richer setting 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.

research assistance. Gorodnichenko acknowledges financial support from the NSF, the Sloan Foundation,

In this paper, we provide causal evidence that firms serve new mar-kets which are geographically close to their prior export destinations with a higher probability than standard gravity models predict. We quantify the impact of this spatial pattern using a data set of Chi-nese firms which had never exported to the EU, the United States, and Canada before 2005. These countries imposed import quotas on textile and apparel products until 2005 and experienced a subsequent increase in imports of previously constrained Chinese firms. Controlling for firm-destination specific effects and accounting for potential true state de-pendence we show that the probability to export to a country increases by about two percentage points for each prior export destination which shares a common border with this country. We find little evidence for other forms of proximity to previous export destinations like common colonizer, language or income group. ∗A previous version of this paper has been circulated under the title “Spatial Exporter Dynamics ” (mimeo, January 2010). We thank two anonymous referees and the assigned co-editor for their comments which have considerably improved the paper. We also thank

In this paper, we provide causal evidence that firms serve new markets which are geographically close to their prior export destinations with a higher probability than standard gravity models predict. We quantify the impact of this spatial pattern using a data set of Chinese firms which had never exported to the EU, the United States, and Canada before 2005. These countries imposed import quotas on textile and apparel products until 2005 and experienced a subsequent increase in imports of previously constrained Chinese firms. Controlling for firm-destination specific effects and accounting for potential true state dependence we show that the probability to export to a country increases by about two percentage points for each prior export destination which shares a common border with this country. We find little evidence for other forms of proximity to previous export destinations like common colonizer, language or income group.