Working Paper: NBER ID: w23456
Authors: Pol Antràs; Alonso De Gortari
Abstract: This paper develops a multi-stage general-equilibrium model of global value chains (GVCs) and studies the specialization of countries within GVCs in a world with barriers to international trade. With costly trade, the optimal location of production of a given stage in a GVC is not only a function of the marginal cost at which that stage can be produced in a given country, but is also shaped by the proximity of that location to the precedent and the subsequent desired locations of production. We show that, other things equal, it is optimal to locate relatively downstream stages of production in relatively central locations. We also develop and estimate a tractable, quantifiable version of our model that illustrates how changes in trade costs affect the extent to which various countries participate in domestic, regional or global value chains, and traces the real income consequences of these changes.
Keywords: Global Value Chains; Trade Costs; Production Location; Centrality; Downstreamness
JEL Codes: C67; D21; D57; D58; F11; F14; F60
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Trade costs increase (F12) | Countries become less likely to participate in downstream stages of production (F69) |
| Trade costs increase (F12) | Negative effect on downstream stages compared to upstream stages (D29) |
| Higher trade costs (F12) | Decrease in average downstreamness of a country (F69) |
| More central countries (P19) | Gain comparative advantage in downstream stages (F12) |
| Trade costs (F19) | Influence on marginal cost of production (D24) |
| Trade elasticity (F14) | Larger for downstream stages (L25) |