SEMINAR: Legal Enforcement and Global Value Chains: Micro-Evidence from Italian Manufacturing Firms

2 PM - room 3G, Department of Economics and Management

Speaker: Antonio Accetturo - Bank of Italy

Abstract

The quality of local institutions has pervasive effects on international trade flows. A large literature has shown that a good contracting environment is an important source of comparative advantage. Recent theoretical contributions have shown that law enforcement impact also on the sourcing decisions in a Global Value Chain (GVC). In this paper we study how institutional quality at the local level influences the ability of firms to participate to GVC in the population of Italian manufacturing firms. Participation to a GVC is measured by international subcontracting agreements of intermediate inputs among firms; trial length of civil disputes proxies for (within country) contract enforcement. We find that firms located in more dysfunctional courts have a lower probability to supply customized intermediate inputs to foreign firms. The effect is driven by firms operating in contract intensive industries.

Paper co-authored with Andrea Linarello (Bank of Italy) and Andrea Petrella (Bank of Italy).