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Measuring the Input Rank in Global Supply Networks

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Document pages: 44 pages

Abstract: We introduce the Input Rank as a measure of relevance of direct and indirectsuppliers in Global Value Chains. We conceive an intermediate input to be morerelevant for a downstream buyer if a decrease in that input s productivityaffects that buyer more. In particular, in our framework, the relevance of anyinput depends: i) on the network position of the supplier relative to thebuyer, ii) the patterns of intermediate inputs vs labor intensities connectingthe buyer and the supplier, iii) and the competitive pressures along supplychains. After we compute the Input Rank from both U.S. and world Input-Outputtables, we provide useful insights on the crucial role of services inputs aswell as on the relatively higher relevance of domestic suppliers and supplierscoming from regionally integrated partners. Finally, we test that the InputRank is a good predictor of vertical integration choices made by 20,489 U.S.parent companies controlling 154,836 subsidiaries worldwide.

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