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The smile curve at the firm level: Where value is added along supply chains

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  • Rungi, Armando
  • Del Prete, Davide

Abstract

In this paper, we investigate at the firm-level where value is added along supply chains on a sample of about 2 million firms in the European Union. In line with the hypothesis of a ‘smile curve’, we detect a non-linear U-shaped relationship between the value added content of a firm and its distance from final consumption. Tasks at the early and late stages of the supply chains generate higher value added, possibly due to a higher knowledge-intensity, after controlling for firm heterogeneity. Importantly, our work shows that it is possible to exploit firm-level databases for an empirical microfoundation of value generation, which is useful for understanding the possibly unequal benefits of participating in global value chains.

Suggested Citation

  • Rungi, Armando & Del Prete, Davide, 2018. "The smile curve at the firm level: Where value is added along supply chains," Economics Letters, Elsevier, vol. 164(C), pages 38-42.
    • Handle: RePEc:eee:ecolet:v:164:y:2018:i:c:p:38-42
    DOI: 10.1016/j.econlet.2017.12.038
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    References listed on IDEAS

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    More about this item

    Keywords

    Global value chains; Firm level; Smile curve; Downstreamness; Value added;
    All these keywords.

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • M21 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics - - - Business Economics

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