A Theory of Just-in-Time and the Growth in Manufacturing Trade
37 Pages Posted: 11 Jul 2013
Date Written: January 2013
This paper argues the widespread adoption of Just-in-Time (JIT) logistics provides a key to understanding the growth in the U.S. trade share. To do so, I develop a dynamic trade model based on the choice of the logistics technology used in a firm's supply chain. The model's predicted trade dynamics depend on how the set of firms using JIT with international suppliers changes over time. A numerical example shows the model is capable of generating growth in the trade share. I present evidence showing the theory is consistent with aggregate data as well as industry-level panel data.
Keywords: trade growth, Just-in-Time, newsvendor problem, airplane transportation
JEL Classification: F10, F14, L60, M11
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