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International trade with sequential production

  • Udo KreickemeierEmail author
  • Zhan Qu
Research Article
  • 21 Downloads

Abstract

We develop a tractable general equilibrium model of international trade with firm heterogeneity and sequential production, based on the partial equilibrium model of Antràs and Chor (Econometrica 81:2127–2204, 2013). The length of supply chains is endogenous, and in the autarky equilibrium more productive final-good producers are served by longer supply chains. International trade in final goods magnifies the differences in the length of supply chains between firms, with exporting firms being served by longer supply chains, and non-exporting firms being served by shorter supply chains than in autarky. We show that, for given model parameters, the gains from trade are larger than in the canonical Melitz model with Pareto-distributed productivities, since production along a sequential supply chain in the Antràs–Chor model is subject to external increasing returns to scale.

Keywords

Trade liberalisation Sequential production Supply chains General equilibrium Gains from trade 

JEL Classification

F12 F15 

Notes

Acknowledgements

We thank Davin Chor, Hartmut Egger, Jens Wrona as well as participants at the European Trade Study Group Annual Conference and the Göttingen Workshop in International Economics for very helpful comments and discussions.

Supplementary material

199_2019_1190_MOESM1_ESM.pdf (332 kb)
Supplementary material 1 (pdf 331 KB)

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Copyright information

© Springer-Verlag GmbH Germany, part of Springer Nature 2019

Authors and Affiliations

  1. 1.Faculty of Business and EconomicsUniversity of GöttingenGöttingenGermany

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