NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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Ken Kikkawa

Sauder School of Business
2053 Main Mall
Vancouver, BC
Canada

E-Mail: EmailAddress: hidden: you can email any NBER-related person as first underscore last at nber dot org
Institutional Affiliation: University of British Columbia

NBER Working Papers and Publications

October 2018Trade and Domestic Production Networks
with Felix Tintelnot, Magne Mogstad, Emmanuel Dhyne: w25120
We use Belgian data with information on domestic firm-to-firm sales and foreign trade transactions to study how international trade affects firms' unit cost and the consumer's real wage. We show theoretically that the gains from trade depend on domestic firm-to-firm linkages. Furthermore, we develop a tractable model of endogenous network formation, allowing firm-to-firm connections to form or break in response to import price changes. Quantitatively, we find that for small import price changes, alternative models that assume a roundabout production structure, despite falsely implying that all firms are connected within one link, yield similar predictions for the change in the real wage to the model that fits the actual linkages between firms. For large changes in the price of foreign good...
 
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