The geography of production and sourcing in the weightless economy: Evidence from open-source software

14  November 2023    2:00 pm CET

Presenter: Gábor Békés (CEU), Discussant: Thi Thanh Ha Doan (ERIA)

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Trade costs, broadly defined, limit interaction between far-away economic agents and motivate them to concentrate in close proximity to one another. The gravity equation, which assigns a large role for geographic distance as a determinant of trade costs, has been remarkably successful in explaining patterns of international and international goods trade between firms, services trade, individual mobility and migration, and even scientific collaboration. It is unclear, however, why distance is relevant for sectors in which direct trade costs are zero. We study patterns of interaction when the good in question is 'weightless' using data from the open-source software industry.  We find that importing other software packages as dependencies is at most weakly correlated with distance. By contrast, collaboration between different developers on the same piece of software is strongly decaying with distance. These results suggest that geography continues to matter for goods and services where collaboration is frequent and deep.

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Gábor Békés is an Associate Professor at the Department of Economics and Business of the Central European University in Austria and a senior research fellow at the KRTK Institute of Economics in Hungary. He's a research affiliate at CEPR. His research is focused on international economics, economic geography, and applied IO with a special interest in collaboration between and within organizations. His work has been published among others in the Journal of International Economics, Global Strategy Journal, Regional Science and Urban Economics, and Economic Policy. With Gábor Kézdi, he wrote "Data Analysis for Business, Economics, and Policy, a comprehensive textbook for Cambridge University Press, published in May 2021. Find him on BlueSky and X as Gabor Bekes.

Thi Thanh Ha Doan is an Economist at the Economic Research Institute for ASEAN and East Asia (ERIA) in Jakarta. Her research interests include industrial organization, international trade, labor market and income distribution. She has intensively involved in various research-based policy development projects at ERIA, focusing on trade facilitation and economic integration; globalization and firms’ behaviour; participation in global value chains and labour market outcome; technology exposure and employment; productivity improvement of the private sector in selected East Asian countries, among others. She is coordinating a capacity building program, in collaboration with UNCTAD experts, for ASEAN government officials on non-tariff measures.

Before joining ERIA, Dr. Doan was a Research Associate at the Asian Development Bank Institute in Tokyo. She was also a short-term consultant for the Organisation for Economic Cooperation and Development.

The organizers gratefully acknowledge support from EU Horizon MSCA Fellowship program.

Keywords: Open-source Software, Trade Costs, Collaboration, Global production networks, international sourcing

JEL classification: F10, F14, L86, R12, O33