A Theory of Just-in-Time and the Growth in Manufacturing Trade

Abstract

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