O-Ring Production Networks

Banu Demir

doi:10.1086/725703

O-Ring Production Networks

2024-01-01

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DOI：10.1086/725703

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Abstract

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We document strong skill matching in Turkish firms' production networks. Additionally, in the data, export demand shocks from rich countries increase firms' skill intensity and their trade with skill-intensive domestic partners. We explain these patterns using a quantitative model with heterogeneous firms, quality choices, and endogenous networks. A counterfactual economy-wide export demand shock of 5% leads both exporters and nonexporters to upgrade quality, raising the average wage by 1.2%. This effect is nine times the effect in a scenario without interconnected quality choices. We use the model to study the conditions for the success of export promotion policies.

Keywords:

EXPORT DESTINATIONS

ELEMENTARY THEORY

QUALITY

TRADE

PRICES

DETERMINANTS

INVESTMENT

INEQUALITY

LINKAGES

WORKERS

O-Ring Production Networks

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