O-Ring Production Networks
10 November 2022 3:30 pm CET
Banu Demir Pakel, University of Oxford
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Venue
This is an online event via Zoom. Please register using the link below.
Description
This presentation is based on a paper co-authored with Cecilia Fieler, Daniel Xu, and Kelly Yang.
Abstract:
We study a production network where quality choices are interconnected across firms. High-quality firms are skill intensive and trade more with other high-quality firms. Using data from Turkish firms, we document strong assortative matching of skills in the production network. A firm-specific export demand shock from a rich country increases the firm’s skill intensity and shifts the firm toward skill- intensive domestic partners. We develop a quantitative model with heterogeneous firms, endogenous quality choices, and network formation. An economy-wide export demand shock of 5 percent induces exporters and non-exporters to upgrade quality, raising the average wage by 1.2 percent. This effect is about nine times the effect in a special case of the model with no interconnection of quality choices.
The presentation, when available, will be posted after the event.
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https://us06web.zoom.us/webinar/register/WN_jdNnD5KFSxm5vdwiIdq4Rw
Banu Demir Pakel
Banu Demir Pakel is an Associate Professor of Economics at Department of Economics and Tutorial Fellow at Brasenose College, University of Oxford. She is currently on leave from Bilkent University (Ankara, Turkey). Since 2016 she is a research affiliate of the Centre for Economic Policy Research (CEPR) in the International Trade and Regional Economics Programme, and an affiliate of the CESifo Research Network. She was a Visiting Assistant Professor at the Department of Economics, Princeton University, during the 2016-17 academic year, and worked as a Research Analyst at the Poverty Reduction and Economic Management (PREM) unit at the World Bank between 2006-2008. Her research is at the intersection of international trade and development economics, focusing on how firms adjust to trade-related shocks and how their adjustment shapes the aggregate economic outcomes. She is holding a DPhil from the University of Oxford, an MA from Bilkent University, and a BSc from Middle East Technical University, all in economics.
Related literature:
- Bernard, A. B., E. Dhyne, G. Magerman, K. Manova, and A. Moxnes (2022): “The Origins of Firm Heterogeneity: A Production Network Approach,” Journal of Political Economy, 130, 1765–1804.
- Kremer, M. (1993): “The O-Ring Theory of Economic Development,” Quarterly Jour- nal of Economics, 108, 551–575.
- Kugler, M. and E. Verhoogen (2011): “Prices, Plant Size, and Product Quality,” Review of Economic Studies, 79, 307–339.
- Manova, K. and Z. Zhang (2012): “Export Prices Across Firms and Destinations,” Quarterly Journal of Economics, 127, 379–436.
JEL classification: F14, O30, L14