Trade Development and Political Economy Presents: Maggie Chen

Trade Development and Political Economy Presents: Maggie Chen on Varieties of Trade Networks: Micro-Level Evidence from China Modern economies are characterized by vast and complex micro trade networks. This paper examines the formation of varieties of firm trade networks and their relative value in productivity growth. Using a unique Chinese firm transaction dataset, the paper quantifies five distinct varieties of inter-firm linkages based on the flows of goods, services, capital, credit, and technology. The paper identifies the causal effect of trade networks by exploiting either exclusion conditions formed by partner characteristics or "second-degree" linkages. The analysis shows that, first, the productivity of the supplier firm plays an important role in the formation of networks, but the effect varies sharply across different network varieties. While more productive firms become larger suppliers of goods and technology, the less productive firms are larger providers of capital, credit, and services. Second, distance matters differently for different varieties of networks. Proximity increases the probability of trade in goods and services, but does not affect capital and technology flows. Third, among the different varieties of networks, capital networks are most effective in stimulating the productivity growth of recipient firms. Maggie Chen is an Economist at the Trade and Integration division of the Development Research Group at the World Bank and Associate Professor of Economics and International Affairs at George Washington University. Her main research interests are in the field of international trade. Her recent work has been on multinational firms and regional trade agreements