A Coasian Model of International Production Chains
NBER Working Paper No. 21520
International supply chains require coordination of numerous activities across multiple countries and firms. We develop a model in which the measure of tasks completed within a firm is determined by transaction costs and the cost of coordinating more activities within the firm. The structural parameters that govern these costs explain variation in supply-chain length and gross-output-to-value-added ratios, and determine countries' comparative advantage along and across supply chains. 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.
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This paper was revised on December 20, 2016
Document Object Identifier (DOI): 10.3386/w21520
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