Research

Collaboration in Technology and Multinational Production  (JMP)

Abstract: How flexible are multinational production networks when assembly technologies are specialized and costly to reconfigure? I develop and estimate a structural multinational production model  incorporating discrete production technology (platforms) choices and inter-firm licensing, using detailed global automotive industry from 2000–2023. Exploiting the 2011 Tōhoku earthquake as a quasi-natural experiment, I show that platform-specific production constraints significantly limit firms’ ability to reallocate output across space. In the model, platform specialization restricts the feasible assembly set, raising marginal costs relative to standard frameworks that assume full technological substitutability of locations, while licensing relaxes these constraints at the expense of fixed collaboration costs. Quantitatively, accounting for technology increases median costs of firms by about 25%, whereas licensing reduces expected costs by 12%. The model allows, in addition to analyzing trade policy shocks, to simulate industrial policies that explicitly target the access to production technologies. While a unilateral export or import ban of specific technologies raise production costs and induce reallocations comparable to tariff shocks, the distributional consequences are different and largely borne by individual firms.

The U.S.-China Trade War and the Geography of Global Production, with Harald Fadinger, Jan Schymik & Lei Li

Abstract:  We combine detailed information on global plant-level activities and trade flows to study how trade protection during the period 2018-2022 has affected the geography of global production. We document that during the first phase of the U.S.-China trade war, trade protection strongly shaped the location of global economic activity. Firm entry, local employment, sales, and imports were substantially affected by rising tariffs, and responses varied along global value chains (GVC): industries that are more distant from final demand (more upstream) responded less sensitively to changes in protection. While imposed tariffs on outputs increased local economic activity, tariffs on inputs dampened economic activity, and both effects were starkest in more downstream industries. Furthermore, the U.S.-China trade war had significant global spillover effects on firm entry, sales, and employment in third countries, with most of this adjustment happening due to reshuffling of sales of multinational companies within their  affiliate network.   In particular,  U.S. tariffs on China, or Chinese tariffs on inputs sourced from the U.S. prompted Chinese multinational firms to relocate production abroad, benefiting third countries in terms of local economic activity. These effects were stronger in more downstream sectors. By contrast, China's tariffs on the U.S. or U.S. tariffs on Chinese inputs  had negative third-country effects on local economic activity via trade diversion.