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Digital Library

of the European Council for Modelling and Simulation

 

Title:

An Agent Based Model Of Firms Selling And Sourcing International Decisions With Flexibility To Demand And Supply Shocks

Authors:

Ermanno Catullo

Published in:

 

(2012).ECMS 2012 Proceedings edited by: K. G. Troitzsch, M. Moehring, U. Lotzmann. European Council for Modeling and Simulation. doi:10.7148/2012 

 

ISBN: 978-0-9564944-4-3

 

26th European Conference on Modelling and Simulation,

Shaping reality through simulation

Koblenz, Germany, May 29 – June 1 2012

 

Citation format:

Catullo, E. (2012). An Agent Based Model Of Firms Selling And Sourcing International Decisions With Flexibility To Demand And Supply Shocks. ECMS 2012 Proceedings edited by: K. G. Troitzsch, M. Moehring, U. Lotzmann (pp. 16-22). European Council for Modeling and Simulation. doi:10.7148/2012-0016-0022

DOI:

http://dx.doi.org/10.7148/2012-0016-0022

Abstract:

The increasingly global fragmentation of production is a central topic of the international trade economics re- search agenda. The agent based model presented in this paper tries to combine in a unique coherent schema two usually distinct fields of internationalization analy- sis: from one side firms’ selling decisions (i.e., the choice to export or to invest directly abroad) and from the other side firms’ sourcing decisions (i.e., the choice to out- source or to produce directly intermediate goods). There- fore, assuming the presence of fixed and variable costs to export and to import, the model is able to reproduce both the exporters and importers firm better performance empirical evidence. Moreover, assuming that production flexibility to shocks is higher with lower capital intensity and it increases when firms outsource their intermediate goods, the model replicates the positive empirical rela- tionship between sectoral capital intensity and imports of intermediate goods from foreign affiliates. The simulta- neous study of selling and sourcing decisions might offer useful tools to understand economic processes and gives the opportunity to test the effects of different combina- tions of trade and industrial policy measures on interna- tional division of labor and welfare.

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