The Competence Centre for International Economics Research (FIW) kindly invites to participate in the Seminar in International Economics on the topic
O-Ring Production Networks
Banu Demir Pakel
University of Oxford
Thursday, 10th of November 2022, 3:30 p.m. (CET)
This presentation is based on a paper co-authored with Cecilia Fieler, Daniel Xu, and Kelly Yang.
We study a production network where quality choices are interconnected across firms. High-quality firms are skill intensive and trade more with other high-quality firms. Using data from Turkish firms, we document strong assortative matching of skills in the production network. A firm-specific export demand shock from a rich country increases the firm’s skill intensity and shifts the firm toward skill- intensive domestic partners. We develop a quantitative model with heterogeneous firms, endogenous quality choices, and network formation. An economy-wide export demand shock of 5 percent induces exporters and non-exporters to upgrade quality, raising the average wage by 1.2 percent. This effect is about nine times the effect in a special case of the model with no interconnection of quality choices.
The seminar series is organised by the Vienna Institute for International Economic Studies (wiiw) in co-operation with FIW, the Centre of Competence in International Economics. The seminar provides a forum for presentation and discussion of recent academic research in the field of international economics.