An Elementary Theory of Global Supply Chains

By S. Wang, Jonathan Vogel, Arnaud Costinot. Social Science Research Network, 2011

351 citations recorded by the source corpus.

This paper develops an elementary theory of global supply chains. In spite of its simplicity, our theory is consistent with a number of stylized facts and able to deliver a rich set of predictions regarding how vertical specialization shapes the interdependence of nations. Among other things, our analysis predicts that poor countries have higher shares of primary production and assembly in value added, and provides a novel rationale for why rich countries both tend to trade relatively more with other rich countries and export and import goods with higher unit values. Our analysis also demonstrates that observing a country "moving up the chain"--an observation which is often taken as good news among policy makers--does not necessarily signal an improvement in its relative competitiveness and may very well be associated with a welfare loss. Our results point towards the importance of modeling the sequential nature of production for understanding the consequences of technological changes in developing and developed countries on their trading partners worldwide.

Subfields: Economics and Econometrics, Strategy and Management

View Paper: https://www.semanticscholar.org/paper/e3b6dde5c9938b0c7fb21f6304d613ccc13bea08

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Citations in the corpus

From micro to macro via production networks (2014, background): “Relatedly, recent theoretical work on global supply chains and the network structure of international trade can be another fruitful source of cross-talk on production networks (Antras and Chor 2013; Chaney 2013; Costinot et al. 2013).”
Input Specificity and the Propagation of Idiosyncratic Shocks in Production Networks (2016, result): “Hence, in contrast to Costinot, Vogel, and Wang (2013) who assume that downstream errors (or disasters) are more costly because they destroy a longer chain of value added, our results suggest that upstream errors are more costly because they prohibit downstream tasks from being performed.”
Global Value Chains and the Productivity of Canadian Manufacturing Firms (2014, background): “One focuses on the theoretical reason for GVCs (Findlay 1978; Dixit and Grossman 1982; Markusen and Venables 2007; Grossman and RossiHansburg 2008; Baldwin and Venable 2010; Baldwin and Robert-Nicoud 2010; Costinot et al. 2013), governance types and determinants (Gereffi et al.”
Fragmentation and Trade in Value Added Over Four Decades (2012, neutral): “…work by Bems, Johnson, and Yi (2010), Trefler and Zhu (2010), Daudin, Rifflart, 1See also Dixit and Grossman (1982), Baldwin and Venables (2010), or Costinot, Vogel, and Wang (2011) for related sequential models. and Schweisguth (2011), Erumban, Los, Stehrer, Timmer, and de Vries (2011), Johnson…”
Missing Gains from Trade (2014, neutral): “Sequential production also can be consequential for the organization of stages of production within and beyond the boundaries of the rm (see Antràs and Chor (2013) and across countries (see Costinot, Vogel and Wang 2013). stage s; the dual unit cost function takes the same form as in (4).”
Technology and Production Fragmentation: Domestic versus Foreign Sourcing (2016, background): “Table 4 also presents results on the industry share of differentiated inputs from Nunn (2007), skill and capital intensity from the NBER productivity database, and routineness from Costinot et al. (2011).12 Panel A shows that the industry share of plants purchasing CMS is positively correlated with ”
Spiders and snakes: Offshoring and agglomeration in the global economy (2013, neutral): “Levine (2010) and Costinot et al (2011) study the implications of a snake in which mistakes can occur at each stage.”