Even in export-oriented industries, only a handful of firms ship their goods abroad. These firms are systematically different from their purely domestic counterparts. This column sheds light on the domestic supply chain of exporters to uncover firms whose production is exported indirectly. Accounting for indirect exporters brings the empirics of international trade closer to the modern structure of production, characterised by many stages in possibly many locations. These findings suggest that the distributional effects of globalisation go beyond the exporters versus non-exporters dichotomy.….
A better understanding of the production structure that underpins observed international trade flows is important for assessing trade-related policies. In complex economies that are characterised by a large degree of production fragmentation, customs data alone provide limited information for answering questions such as which firms are impacted by trade policies, or how foreign demand shocks can propagate throughout the domestic economy. The established fact that exporters are a small club of the best performing firms gained them the label of ‘export superstars’. These firms, however, are just a tip of the production iceberg as they are embedded in domestic networks of firms that are exceptional performers themselves. Thus even though direct exporters shine the brightest, they are in fact part of bright constellations. These findings emphasise that the group of stakeholders in trade liberalisation negotiations is much wider than the ‘happy few’ who export directly and that distributional effects of globalisation go beyond the exporters versus non-exporters dichotomy.vox.eu
The supplier network of exporters: Connecting the dots
Stela Rubínová, Emmanuel Dhyne