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

26 Pages Posted: 13 Jan 2012

See all articles by Carlo Altomonte

Carlo Altomonte

Bocconi University - Department of Policy Analysis and Public Management

Filippo di Mauro

European Central Bank (ECB)

Gianmarco Ireo Paolo Ottaviano

Bocconi University - Department of Economics; Centre for Economic Policy Research (CEPR)

Armando Rungi

IMT Institute for Advanced Studies; Bocconi University

Vincent Vicard

Centre d'Etudes Prospectives et d'Info. Internationales (CEPII)

Multiple version iconThere are 3 versions of this paper

Date Written: December 16, 2011

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.

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

JEL Classification: F23, F15, L22

Suggested Citation

Altomonte, Carlo and di Mauro, Filippo and Ottaviano, Gianmarco Ireo Paolo and Rungi, Armando and Vicard, Vincent, Global Value Chains during the Great Trade Collapse: A Bullwhip Effect? (December 16, 2011). ECB Working Paper No. 1412. Available at SSRN: https://ssrn.com/abstract=1973497

Carlo Altomonte (Contact Author)

Bocconi University - Department of Policy Analysis and Public Management ( email )

Via Roentgen 1
Milan, 20136
Italy

Filippo Di Mauro

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Gianmarco Ireo Paolo Ottaviano

Bocconi University - Department of Economics ( email )

Via Gobbi 5
Milan, 20136
Italy

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Armando Rungi

IMT Institute for Advanced Studies ( email )

Complesso San Micheletto
Lucca, 55100
Italy
393334621884 (Phone)

Bocconi University ( email )

Via Sarfatti, 25
Milan, MI 20136
Italy

Vincent Vicard

Centre d'Etudes Prospectives et d'Info. Internationales (CEPII) ( email )

20, avenur de S├ęgur
Paris Cedex 07, F-75334
France

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