HIAS GLECS

HIAS-E-62

A Matching Theory of Global Supply Chains

Abstract:

This paper develops a simple general equilibrium model of global supply chains (GSCs) that jointly addresses three key decisions of firms forming GSCs, namely selection (whether to form a GSC), location (where to find GSC partners), and matching (with which firms to form a GSC). The model develops a Becker type assortative matching model of final producers and suppliers both of which are heterogeneous in capability (productivity/quality) of their tasks, and integrates it with a Melitz type model of selection and a Ricardian comparative advantage model of location. The model presents a new mechanism of gains from trade associated with firm heterogeneity. Namely, trade liberalization causes rematching of firms toward positive assortative matching at the world level as a recent empirical study on exporter-importer matching data observes.

Report No.: HIAS-E-62
Author(s): Yoichi Sugita(a)
Affiliation: (a) Hitotsubashi University, Graduate School of Economics, 2-1, Naka, Kunitachi, Tokyo 186-8603, Japan
Issued Date: December 2017
Keywords: global supply chains, firm heterogeneity, two-sided heterogeneity, mathing, trade in intermediate goods, quality differentiation
JEL: F12
Links: PDF, HERMES-IR, RePEc