We identify choke points in global production networks as industries bridging flows across global value chains. These industries exhibit low substitutability: US firms exposed to Chinese choke points during the 2022 Covid-19 lockdowns experienced large and persistent sales declines. The Red Sea crisis demonstrates how negative shocks to water transport, a single choke point, propagate throughout the global network. This structural fragility is priced in global stock markets: firms in choke point industries earn annualized benchmark-adjusted returns exceeding 6%. The premium compensates for aggregate consumption risk, as downturns in choke point industries predict lower future US and global consumption growth.

暂无

We study the role of firm heterogeneity and imperfect competition for global production networks and the gains from trade. We develop a quantifiable trade model with two-sided firm heterogeneity, matching frictions, and oligopolistic competition upstream. More productive buyers endogenously match with more suppliers, thereby inducing tougher competition among them to enjoy lower input costs and superior performance. Transaction-level customs data confirms that downstream French and Chilean firms import higher values and quantities at lower prices as upstream Chinese markets become more competitive over time, with stronger responses by larger firms. Moreover, suppliers charge more diversified buyers lower mark-ups. Counterfactual analysis indicates that entry upstream benefits high-productivity buyers, while lower matching or trade costs benefit all buyers, with the biggest boost to mid-productivity buyers. All three shocks generate sizeable welfare gains, especially under package reforms. Global production networks thus mediate bigger effects and cross-border spillovers from industrial and trade policies.