Journal Article

An Elementary Theory of Global Supply Chains

Arnaud Costinot, Jonathan Vogel and Su Wang

in The Review of Economic Studies

Published on behalf of Review of Economic Studies Ltd

Volume 80, issue 1, pages 109-144
Published in print January 2013 | ISSN: 0034-6527
Published online May 2012 | e-ISSN: 1467-937X | DOI:
An Elementary Theory of Global Supply Chains

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This article develops an elementary theory of global supply chains. We consider a world economy with an arbitrary number of countries, one factor of production, a continuum of intermediate goods and one final good. Production of the final good is sequential and subject to mistakes. In the unique free trade equilibrium, countries with lower probabilities of making mistakes at all stages specialize in later stages of production. Using this simple theoretical framework, we offer a first look at how vertical specialization shapes the interdependence of nations.

Keywords: global supply chains; vertical specialization; interdependence of nations; F1

Journal Article.  16531 words.  Illustrated.

Subjects: International Trade

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