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Multinational Supply Chains

Paper Session

Friday, Jan. 7, 2022 10:00 AM - 12:00 PM (EST)

Hosted By: Econometric Society
  • Chair: Cecile Gaubert, University of California-Berkeley

Import Tariffs and Global Sourcing

Pol Antras
,
Harvard University
Teresa Fort
,
Dartmouth University
Agustin Gutierrez
,
University of Chicago
Felix Tintelnot
,
University of Chicago

Abstract

We study the effect of trade policy in an environment with final good and intermediate input trade. Although real-world tariffs tend to be higher for final goods, existing theory suggests optimal tariffs are uniform across sectors -- or perhaps higher for inputs. We show that optimal input tariffs are lower than final-good tariffs in the presence of product differentiation, scale economies, and market power in both upstream and downstream sectors. While both types of tariffs lead to terms-of-trade and production relocation effects, input tariffs are more distortionary since they also affect final good producers' location and production decisions. We also explore the welfare consequences of increases in input tariffs of the type implemented by President Trump during the recent US-China trade war.

Global Giants and Local Stars: How Changes in Brand Ownership Affect Competition

Vanessa Alviarez
,
University of British Columbia
Keith Head
,
University of British Columbia
Thierry Mayer
,
Sciences Po

Abstract

We assess the consequences for consumers in 76 countries of multinational acquisitions in beer and spirits. Outcomes depend on how changes in ownership affect markups versus efficiency. We find that owner fixed effects contribute very little to the performance of brands. On average, foreign ownership tends to raise costs and lower appeal. Using the estimated model, we simulate the consequences of counterfactual national merger regulation. The US beer price index would have been 4–7% higher without divestitures. Up to 30% savings could have been obtained in Latin
America by emulating the pro-competition policies of the US and EU.

Responsible Sourcing? Theory and Evidence From Costa Rica

Alonso Alfaro-Urena
,
Central Bank of Costa Rica and University of Costa Rica
Benjamin Faber
,
University of California-Berkeley
Cecile Gaubert
,
University of California-Berkeley
Isabela Manelici
,
Princeton University
Jose Vasquez
,
Princeton University

Abstract

In recent years the adoption of Responsible Sourcing (RS) requirements by multinational enterprises (MNEs) has become widespread. They impose minimum standards on wages, benefits, working conditions and other production practices at their suppliers. Despite the growth in RS, there has been relatively little theoretical work or empirical evidence on the economic consequences. In particular, we know little about the effectiveness of RS to benefit firms and workers in developing countries. To guide the analysis, we develop a quantitative general equilibrium model designed to study the incidence of RS requirements on suppliers and workers in sourcing origin countries. We derive comparative statics and welfare expressions under different modeling assumptions and decompose the competing forces. We then build a new database covering the near-universe of RS rollouts by more than 400 MNEs sourcing in Costa Rica starting in 2009, and combine it with firm-to-firm transaction records and employer-employee matched administrative microdata for all Costa-Rican firms. Guided by model predictions, we provide empirical evidence on the effects of RS rollouts on suppliers and workers and use them to discriminate between different variants of our theory. Finally, we combine empirical evidence and microdata to calibrate the model and quantify the welfare implications of RS and related policy counterfactuals.
Discussant(s)
Lorenzo Caliendo
,
Yale University
Jan De Loecker
,
KU Leuven
Felix Tintelnot
,
University of Chicago
JEL Classifications
  • F2 - International Factor Movements and International Business