Buyer investment, product variety, and intrafirm trade
By: Yongmin Chen, Robert C. Feenstra.
Contributors: Feenstra, Robert C.; National Bureau of Economic Research.
Series: NBER working paper series ;; working paper 11752; Working paper series (National Bureau of Economic Research : Online) ;; working paper no. 11752.
Publisher: National Bureau of Economic Research
Published: 2005
Place of publication: Cambridge, MA
Language: eng
Format: Electronic resource
Subjects: International trade -- Mathematical models.; Intra-firm trade -- Mathematical models.; Taiwan -- Commerce -- United States.; United States -- Commerce -- Taiwan.; Korea (South) -- Commerce -- United States.; United States -- Commerce -- Korea (South)
Description: "This paper studies a simple model of buyer investment and its effect on the variety and vertical structure of international trade.  A distinction is made between two types of buyer investment: "flexible" and "specific." Their interactions with the entry and pricing incentives of suppliers are analyzed.  It is shown that (i) there can be multiple equilibria in the variety of products traded, and (ii) less product variety is associated with more intrafirm trade.  The possibility of multiple equilibria is consistent with the observation that some similar economies, such as Taiwan and South Korea, differ substantially in their export varieties to the U.S.  A formal empirical analysis confirms the negative correlation between product variety and intrafirm trade"--National Bureau of Economic Research web site.
Notes: Includes bibliographical references.
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