The recent years have seen the rise of platform firms like Amazon and eBay as the new marketplace between global manufacturers and consumers. A new academic literature has analysed how such platforms drastically changed the way countries, firms and people trade and participate in global value chains (GVCs). Generally, the literature points out how platforms decrease frictions to trade, but often at the cost of increasing market concentration and excessive bargaining power by platforms’ owners. While these findings are consolidated for developed countries, the lack of data makes it more difficult to study whether platforms played a similar role also in emerging economies. The first strand of this project contributes to this literature by studying how online platforms have helped firms in emerging economies to trade more.
In the first strand of research, the Principal Investigator collaborated with Edoardo Chiarotti, an added staff member, and Daria Taglioni, a senior economist at the World Bank, to undertake a project assessing how information and communication technology (ITC) may help firms in emerging economies to trade more and join global value chains (GVC). Specifically, this strand of the project focuses on the role of platform firms, i.e. online matchmakers which can reduce search costs and matching frictions and thus make it easier for small firms to participate to GVC. This collaboration resulted in the following paper : “Trading through Platforms: Evidence from AliExpress”, which empirically addresses the beneficial impact of AliExpress – Alibaba’s trade-oriented platform – on Chinese exports. With a difference-in-differences regression analysis, this paper finds that AliExpress has largely boosted exports of Chinese firms, specifically to the benefit of Chinese value added. This evidence is highly valuable for policy makers in developing countries, as it shows how an online-trade platform can help an emerging economy to trade more and move up in the global value chain.
In the second strand of research, the team focused on investigating the firm-level dynamics of openness, innovation and productivity. Despite the multitude of studies on the link between firms' degree of openness, innovation and productivity, there are still a few key gaps in the literature. First, most of the related literature is based on aggregated country-level or sector-level analyses. Among the studies that do use firm-level data, nearly all of them use cross-section data which does not allow one to capture unobserved firm-level heterogeneity (that also goes unaccounted for in the case of more aggregate analyses). Second, the majority of this literature focuses on advanced economies and firm-level evidence on developing countries is still relatively limited. This is in part due to the scarcity of comparable firm-level survey data for developing countries. The second strand of this project aims to fill these two gaps in the literature by leveraging the World Bank Enterprise Surveys to construct a cross-country panel dataset spanning over 40 emerging markets and developing economies. By focusing on the link between openness, innovation and productivity, this paper aims to advance the understanding of how developing and emerging economies can maximise their potential gains from openness.
In the past year, this project has benefited from comments and suggestions from participants at various academic conferences, namely GLOBECOS - Global Community of Social Sciences, UIC Barcelona Seminar on Collaborative Economy in the Digital Environment, Virtual Conference on the Challenges of Contemporary Economics and the 8th International Conference On Sustainable Development, among others. The team is now working on the final drafts of the two papers to submit to top peer-reviewed economic journals.