Working Paper: NBER ID: w9162
Authors: Keith Head; John Ries; Barbara J. Spencer
Abstract: This paper develops a model in which upstream network insiders' conduct relationship specific investment that induces the downstream firm to transact within networks. The scale of destination-country production and part-specific measures of the importance of network relationships and engineering costs are used to explain the pattern of U.S. auto parts exports. Our results support the prediction that large scale promotes relationship-specific investment and reduces imports. Also, while Japan is a large parts importer, the composition of its imports is shifted away from parts where vertical keiretsu are prominent. Nations hosting U.S.-owned automakers import more U.S. parts.
Keywords: No keywords provided
JEL Codes: F12; F23; L14; L22
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| larger scale production (L23) | relationship-specific investments (RSI) (D14) |
| relationship-specific investments (RSI) (D14) | reduction in imports (F14) |
| larger scale production (L23) | reduction in imports (F14) |
| presence of vertical keiretsu (L22) | lower imports of parts (F69) |
| scale of local production (E23) | influence on trade outcomes (F10) |
| higher production of U.S. automobile affiliates (L62) | more imports of U.S. parts (L62) |