SMU SOE Seminar (July 14, 2022): The Distribution of Gains from Multinational Production

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TOPIC:

THE DISTRIBUTION OF GAINS FROM MULTINATIONAL PRODUCTION

ABSTRACT The literature on global value chains has mostly concerned itself with the optimal own-ership structure, while giving little attention to the issue of distribution of gains. I argue that given frictions in transfers among participants in a supply chain, the equilibrium or-ganizational mode of production as well as the design of the products may be inefficient. I extend the existing models of global value chains in two key directions. First, I introduce frictions to making transfers among parties. Second, I assume that the final-good producer could enhance its productivity by procuring a customized—as opposed to a generic—intermediate input. A customized input creates a hold-up problem as it is less marketable to third parties. In equilibrium, highly productive final-good producers establish a partnership with intermediate-input manufacturers to procure customized inputs, while producers with in-termediate productivity obtain a generic input from the market. Moreover, productive firms own too much of the common assets and, thus, provide too little incentives for the manufacturer to contribute to the production (intensive-margin inefficiency.) Finally, moderately-productive firms choose generic inputs, even though using a customized input would increase the total payoffs of the parties (extensive-margin inefficiency.) Click here to view the CV.
		PRESENTER Mostafa Beshkar Indiana University
		RESEARCH FIELDS International Economics Applied Microeconomics
		DATE: 14 July 2022 (Thursday)
		TIME: 10am - 11.30am
		VENUE: Meeting Room 5.1, Level 5 School of Economics Singapore Management University 90 Stamford Road Singapore 178903

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