We develop a property-rights model of the firm in which production entails a continuum of uniquely sequenced stages. In each stage, a final-good producer contracts with a distinct supplier for the procurement of a customized stage-specific component. Our model yields a sharp characterization for the optimal allocation of ownership rights along the value chain. We show that the incentive to integrate suppliers varies systematically with the relative position (upstream versus downstream) at which the supplier enters the production line. Furthermore, the nature of the relationship between integration and downstreamness depends crucially on the elasticity of demand faced by the final-good producer. Our model readily accommodates various sources of asymmetry across final-good producers and across suppliers within a production line, and we show how it can be taken to the data with international trade statistics. Combining data from the U.S. Census Bureau's Related Party Trade database and estimates of U.S. import demand elasticities from Broda and Weinstein (2006), we find empirical evidence broadly supportive of our key predictions. In the process, we develop two novel measures of the average position of an industry in the value chain, which we construct using U.S. Input-Output Tables.

We investigate how the link between individual schooling and political participation is affected by country characteristics. Using individual survey data, we find that political participation is more responsive to schooling in land-abundant countries and less responsive in human capital–abundant countries, even while controlling for country political institutions and cultural attitudes. We find related evidence that political participation is less responsive to schooling in countries with a higher skill premium, as well as within countries for individuals in skilled occupations. The evidence motivates a theoretical explanation in which patterns of political participation are influenced by the opportunity cost of engaging in political rather than production activities.

We propose two distinct approaches to the measurement of industry upstreamness (or average distance from final use) and show that they yield an equivalent measure. Furthermore, we provide two additional interpretations of this measure, one of them related to the concept of forward linkages. We construct this measure for 426 industries using the 2002 US input-output Tables. We also construct our measure using data from selected countries in the OECD STAN database. Finally, we present an application of our measure that explores the determinants of the average upstreamness of exports at the country level using trade flows for 2002.

A key decision facing firms is the extent of control to exert over the different stages in their production processes. We develop and test a property rights model of firm boundary choices along the value chain. We construct firm-level measures of the upstreamness of integrated and nonintegrated inputs by combining information on firms’ production activities in more than 100 countries with input-output tables. Whether a firm integrates upstream or downstream suppliers depends crucially on the elasticity of demand it faces. Moreover, integration is shaped by the relative contractibility of stages along the value chain, as well as by the firm’s productivity.