IDEAS home Printed from https://ideas.repec.org/p/red/sed017/280.html
   My bibliography  Save this paper

Firm-to-firm Trade in Sticky Production Networks

Author

Listed:
  • Kevin Lim

    (Dartmouth College)

Abstract

This paper develops a structural model of trade between heterogeneous firms in which the network of firm-level input-output linkages is determined both dynamically and endogenously. Firms vary in the size of their customer and supplier bases, occupy heterogeneous positions in different supply chains, and adjust their sets of trade partners over time. Despite the rich heterogeneity and dynamics, the model remains computationally tractable. Using both cross-sectional and panel data on trading relationships between US firms, I estimate the model's key parameters via a simulated method of moments technique and assess its fit to the data. Simulations of the model are then used to study how the structure and dynamics of the production network matter for the propagation of firm-level supply and demand shocks and their translation into aggregate effects.

Suggested Citation

  • Kevin Lim, 2017. "Firm-to-firm Trade in Sticky Production Networks," 2017 Meeting Papers 280, Society for Economic Dynamics.
    • Handle: RePEc:red:sed017:280
    as

    Download full text from publisher

    File URL: https://red-files-public.s3.amazonaws.com/meetpapers/2017/paper_280.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Glenn Magerman & Karolien De Bruyne & Emmanuel Dhyne & Jan Van Hove, 2016. "Heterogeneous Firms and the Micro Origins of Aggregate Fluctuations," Working Papers ECARES ECARES 2016-35, ULB -- Universite Libre de Bruxelles.
    2. Andrew B. Bernard & Andreas Moxnes & Yukiko U. Saito, 2019. "Production Networks, Geography, and Firm Performance," Journal of Political Economy, University of Chicago Press, vol. 127(2), pages 639-688.
    3. Andrew B. Bernard & Andreas Moxnes & Karen Helene Ulltveit-Moe, 2018. "Two-Sided Heterogeneity and Trade," The Review of Economics and Statistics, MIT Press, vol. 100(3), pages 424-439, July.
    4. Rauch, James E., 1999. "Networks versus markets in international trade," Journal of International Economics, Elsevier, vol. 48(1), pages 7-35, June.
    5. Daron Acemoglu & Vasco M. Carvalho & Asuman Ozdaglar & Alireza Tahbaz‐Salehi, 2012. "The Network Origins of Aggregate Fluctuations," Econometrica, Econometric Society, vol. 80(5), pages 1977-2016, September.
    6. Demange,Gabrielle & Wooders,Myrna (ed.), 2005. "Group Formation in Economics," Cambridge Books, Cambridge University Press, number 9780521842716, January.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. FUJII Daisuke & SAITO Yukiko, 2019. "Firm Performance and Asymmetry of Supplier and Customer Relationships," Discussion papers 19032, Research Institute of Economy, Trade and Industry (RIETI).
    2. Andrew B. Bernard & Andreas Moxnes, 2018. "Networks and Trade," Annual Review of Economics, Annual Reviews, vol. 10(1), pages 65-85, August.
    3. Yi Huang & Chen Lin & Sibo Liu & Heiwai Tang, 2018. "Trade Linkages and Firm Value: Evidence from the 2018 US-China “Trade War”," IHEID Working Papers 11-2018, Economics Section, The Graduate Institute of International Studies.
    4. Johannes Boehm & Ezra Oberfield, 2020. "Misallocation in the Market for Inputs: Enforcement and the Organization of Production," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 135(4), pages 2007-2058.
    5. Dominik Boddin & Frank Stähler, 2018. "The Organization of International Trade," CESifo Working Paper Series 7378, CESifo.
    6. Yusuf Emre Akgündüz & Salih Fendoğlu, 2022. "Export Prices, Imported Inputs, and Domestic Supply Networks," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 70(3), pages 383-419, September.
    7. Spray, J., 2101. "Search Externalities in Firm-to-Firm Trade," Cambridge Working Papers in Economics 2108, Faculty of Economics, University of Cambridge.
    8. Huang, Yi & Lin, Chen & Liu, Sibo & Tang, Heiwai, 2023. "Trade networks and firm value: Evidence from the U.S.-China trade war," Journal of International Economics, Elsevier, vol. 145(C).
    9. Taiji Furusawa & Tomohiko Inui & Keiko Ito & Heiwai Tang, 2017. "Global Sourcing and Domestic Production Networks," CESifo Working Paper Series 6658, CESifo.
    10. David Baqaee & Emmanuel Farhi, 2019. "Networks, Barriers, and Trade," NBER Working Papers 26108, National Bureau of Economic Research, Inc.
    11. Joseph Steinberg, 2019. "On the Source of U.S. Trade Deficits: Global Saving Glut or Domestic Saving Drought?," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 31, pages 200-223, January.
    12. Piyush Panigrahi, 2021. "Endogenous Spatial Production Networks: Quantitative Implications for Trade and Productivity," CESifo Working Paper Series 9466, CESifo.
    13. FUJII Daisuke & SAITO Yukiko & SENGA Tatsuro, 2017. "The Dynamics of Inter-firm Networks and Firm Growth," Discussion papers 17110, Research Institute of Economy, Trade and Industry (RIETI).
    14. Piyush Panigrahi, 2021. "Endogenous Spatial Production Networks: Quantitative Implications for Trade & Productivity," Cowles Foundation Discussion Papers 2314, Cowles Foundation for Research in Economics, Yale University.
    15. Zhang, Yiran, 2021. "Quantitative Assessment on Frictions in Technology Market," MPRA Paper 109470, University Library of Munich, Germany.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Andrew B. Bernard & Andreas Moxnes, 2018. "Networks and Trade," Annual Review of Economics, Annual Reviews, vol. 10(1), pages 65-85, August.
    2. Emmanuel Dhyne & Ayumu Ken Kikkawa & Glenn Magerman, 2022. "Imperfect Competition in Firm-to-Firm Trade," Journal of the European Economic Association, European Economic Association, vol. 20(5), pages 1933-1970.
    3. Huang, Hanwei & Manova, Kalina & Perelló, Oscar & Pisch, Frank, 2024. "Firm Heterogeneity and Imperfect Competition in Global Production Networks," CEPR Discussion Papers 19408, C.E.P.R. Discussion Papers.
    4. Kramarz, Francis & Martin, Julien & Mejean, Isabelle, 2020. "Volatility in the small and in the large: The lack of diversification in international trade," Journal of International Economics, Elsevier, vol. 122(C).
    5. Huang, Yi & Lin, Chen & Liu, Sibo & Tang, Heiwai, 2023. "Trade networks and firm value: Evidence from the U.S.-China trade war," Journal of International Economics, Elsevier, vol. 145(C).
    6. Jonathan EATON & Samuel KORTUM & Francis KRAMARZ, 2016. "Firm-to-Firm Trade: Imports, exports, and the labor market," Discussion papers 16048, Research Institute of Economy, Trade and Industry (RIETI).
    7. Mundt, Philipp, 2021. "The formation of input–output architecture: Evidence from the European Union," Journal of Economic Behavior & Organization, Elsevier, vol. 183(C), pages 89-104.
    8. Yuzuka Kashiwagi & Yasuyuki Todo & Petr Matous, 2021. "Propagation of economic shocks through global supply chains—Evidence from Hurricane Sandy," Review of International Economics, Wiley Blackwell, vol. 29(5), pages 1186-1220, November.
    9. Glenn Magerman & Karolien De Bruyne & Emmanuel Dhyne & Jan Van Hove, 2016. "Heterogeneous Firms and the Micro Origins of Aggregate Fluctuations," Working Papers ECARES ECARES 2016-35, ULB -- Universite Libre de Bruxelles.
    10. Hempfing, Alexander & Mundt, Philipp, 2022. "Tie formation in global production chains," BERG Working Paper Series 181, Bamberg University, Bamberg Economic Research Group.
    11. Vasily Korovkin & Alexey Makarin, 2020. "Production Networks and War," Papers 2011.14756, arXiv.org, revised Aug 2022.
    12. Egger, Peter H. & Erhardt, Katharina & Lassmann, Andrea, 2019. "Immigration and firms’ integration in international production networks," European Economic Review, Elsevier, vol. 111(C), pages 1-34.
    13. Arnarson, Björn Thor, 2020. "The superstar and the followers: Intra-firm product complementarity in international trade," Journal of Economic Behavior & Organization, Elsevier, vol. 177(C), pages 277-304.
    14. Matilde Bombardini & C. Keith Head & Maria D. Tito & Ruoying Wang, 2021. "How the breadth and depth of import relationships affect the performance of Canadian manufacturers," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 54(4), pages 1525-1561, November.
    15. FURUSAWA Taiji & ITO Keiko & INUI Tomohiko & Heiwai TANG, 2015. "Offshoring, Relationship-Specificity, and Domestic Production Networks," Discussion papers 15122, Research Institute of Economy, Trade and Industry (RIETI).
    16. Lafond, François & Astudillo-Estévez, Pablo & Bacilieri, Andrea & Borsos, András, 2023. "Firm-level production networks: what do we (really) know?," INET Oxford Working Papers 2023-08, Institute for New Economic Thinking at the Oxford Martin School, University of Oxford.
    17. Ding, Feng & Liu, Qiliang & Shi, Hanzhong & Wang, Wenming & Wu, Shan, 2023. "Firms' access to informal financing: The role of shared managers in trade credit access," Journal of Corporate Finance, Elsevier, vol. 79(C).
    18. Peydró, José-Luis & Jiménez, Gabriel & Kenan, Huremovic & Moral-Benito, Enrique & Vega-Redondo, Fernando, 2020. "Production and financial networks in interplay: Crisis evidence from supplier-customer and credit registers," CEPR Discussion Papers 15277, C.E.P.R. Discussion Papers.
    19. Muscillo, Alessio & Pin, Paolo & Razzolini, Tiziano & Serti, Francesco, 2018. "Does "Network Closure" Beef up Import Premium?," IZA Discussion Papers 12036, Institute of Labor Economics (IZA).
    20. Martin, Julien & Mejean, Isabelle & Parenti, Mathieu, 2020. "Relationship stickiness, international trade, and economic uncertainty," CEPR Discussion Papers 15609, C.E.P.R. Discussion Papers.

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:red:sed017:280. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Christian Zimmermann (email available below). General contact details of provider: https://edirc.repec.org/data/sedddea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.