Discussion Paper

No. 2007-18 | April 25, 2007

Michel Fouquin, Laurence Nayman, and Laurent Wagner

Vertical Production Networks: Evidence from France

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Abstract

This paper investigates the determinants of intra-firm trade of multinational firms located in France, using data on French companies. Results on the vertical pattern of production networks differ according to the affiliates’ location. Lower wage and transportation costs in the developing countries increase, as expected, the vertical segmentation of production. In the developed countries, lower trade and unit wage costs, and hence, a strong and positive labour productivity matter a lot in explaining French MNCs’ preferences. Among the other variables of interest, partnership and market potential have been given special attention. The results substantiate a mix of vertical and horizontal FDI, mainly when we separate out capital in¬tensive from labour intensive intermediate products.

JEL Classification

F1 F23 L1

Cite As

Michel Fouquin, Laurence Nayman, and Laurent Wagner (2007). Vertical Production Networks: Evidence from France. Economics Discussion Papers, No 2007-18, Kiel Institute for the World Economy. http://www.economics-ejournal.org/economics/discussionpapers/2007-18

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