Journal of Political Economy Vol. 132 No. 1 2024

O-Ring Production Networks

Banu Demir^1,2,3; Ana Cecília Fieler^4,5; Daniel Yi Xu⁴; Kelly Kaili Yang⁶

¹ Economic Policy Institute · ² Bilkent University · ³ Centre for Economic Policy Research · ⁴ National Bureau of Economic Research · ⁵ Yale University · ⁶ Indiana University

Abstract

We document strong skill matching in Turkish firms’ production networks. Additionally, in the data, export demand shocks from rich countries increase firms’ skill intensity and their trade with skill-intensive domestic partners. We explain these patterns using a quantitative model with heterogeneous firms, quality choices, and endogenous networks. A counterfactual economy-wide export demand shock of 5% leads both exporters and nonexporters to upgrade quality, raising the average wage by 1.2%. This effect is nine times the effect in a scenario without interconnected quality choices. We use the model to study the conditions for the success of export promotion policies.

DOI

10.1086/725703

Volume

132

Issue

1

Pages

200-247

Language

en

Sources

openalex crossref bibtex:phds-export.bib

Cite

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