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http://ssrn.com/abstract=1937513
 
 

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Global Value Chains During the Great Trade Collapse: A Bullwhip Effect?


Carlo Altomonte


Bocconi University - Department of Policy Analysis and Public Management

Filippo Di Mauro


European Central Bank (ECB)

Gianmarco I.P. Ottaviano


Bocconi University - Department of Economics and Paolo Baffi Centre on Central Banking and Financial Regulation

Armando Rungi


IMT Lucca Institute for Advanced Studies; Fondazione Eni Enrico Mattei (FEEM); Bocconi University

Vincent Vicard


Banque de France

December 1, 2011

Paolo Baffi Centre Research Paper No. 2011-108

Abstract:     
This paper analyzes the performance of global value chains during the trade collapse. To do so, it exploits a unique transaction-level dataset on French firms containing information on cross-border monthly transactions matched with data on worldwide intra-firm linkages as defined by property rights (multinational business groups, hierarchies of firms). This newly assembled dataset allows us to distinguish firm-level transactions among two alternative organizational modes of global value chains: internalization of activities (intra-group trade/trade among related parties) or establishment of supply contracts (arm's length trade/trade among unrelated parties). After an overall assessment of the role of global value chains during the trade collapse, we document that intra-group trade in intermediates was characterized by a faster drop followed by a faster recovery than arm's length trade. Amplified fluctuations in terms of trade elasticities by value chains have been referred to as the "bullwhip effect" and have been attributed to the adjustment of inventories within supply chains. In this paper we first confirm the existence of such an effect due to trade in intermediates, and we underline the role that different organizational modes can play in driving this adjustment.

Number of Pages in PDF File: 24

Keywords: trade collapse, multinational firms, global value chains, hierarchies of firms, vertical integration

JEL Classification: F23, F15, L22

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Date posted: October 3, 2011 ; Last revised: January 12, 2012

Suggested Citation

Altomonte, Carlo and di Mauro, Filippo and Ottaviano, Gianmarco I.P. and Rungi, Armando and Vicard, Vincent, Global Value Chains During the Great Trade Collapse: A Bullwhip Effect? (December 1, 2011). Paolo Baffi Centre Research Paper No. 2011-108. Available at SSRN: http://ssrn.com/abstract=1937513 or http://dx.doi.org/10.2139/ssrn.1937513

Contact Information

Carlo Altomonte
Bocconi University - Department of Policy Analysis and Public Management ( email )
Via Roentgen 1
Milan, 20136
Italy
Filippo Di Mauro
European Central Bank (ECB) ( email )
Kaiserstrasse 29
Frankfurt am Main, D-60311
Germany
Gianmarco I.P. Ottaviano (Contact Author)
Bocconi University - Department of Economics and Paolo Baffi Centre on Central Banking and Financial Regulation ( email )
Via Gobbi 5
Milan, 20136
Italy
Armando Rungi
IMT Lucca Institute for Advanced Studies ( email )
Complesso San Micheletto
Lucca, 55100
Italy
393334621884 (Phone)
Fondazione Eni Enrico Mattei (FEEM) ( email )
C.so Magenta 63
Milano, 20123
Italy
Bocconi University ( email )
Via Sarfatti, 25
Milan, MI 20136
Italy
Vincent Vicard
Banque de France ( email )
Paris
France
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