TY  - JOUR
AU  - Costinot,Arnaud
AU  - Vogel,Jonathan
AU  - Wang,Su
TI  - An Elementary Theory of Global Supply Chains
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 16936
PY  - 2011
Y2  - April 2011
UR  - http://www.nber.org/papers/w16936
L1  - http://www.nber.org/papers/w16936.pdf
N1  - Author contact info:
Arnaud Costinot
Department of Economics
MIT, E52-243B
50 Memorial Drive
Cambridge MA 02142-1347
Tel: 617/324-1712
Fax: 617/253-1330
E-Mail: costinot@mit.edu

Jonathan Vogel
Department of Economics
Columbia University
420 West 118th Street
New York, NY 10027
Tel: 212/854-9925
Fax: 212/854-8059
E-Mail: jvogel@columbia.edu

Su Wang
MIT
E-Mail: su_wang@mit.edu
AB  - This paper develops an elementary theory of global supply chains. We consider a world economy with an arbitrary number of countries, one factor of production, a continuum of intermediate goods, and one final good. Production of the final good is sequential and subject to mistakes. In the unique free trade equilibrium, countries with lower probabilities of making mistakes at all stages specialize in later stages of production. Because of the sequential nature of production, absolute productivity differences are a source of comparative advantage among nations. Using this simple theoretical framework, we offer a first look at how vertical specialization shapes the interdependence of nations.
ER  -