Beiträge zur Jahrestagung des Vereins für Socialpolitik 2015: Ökonomische Entwicklung - Theorie und Politik - Session: International Trade II No. B08-V3
The paper develops a simple theoretical model of inventory control in global value chains. It identifies a role for intermediaries in managing inventory, and shows that inserting an intermediary as an additional link in a value chain is profitable when demand volatility is high. It also provides conditions under which the intermediary handling inventory is located in the exporting versus the importing country. Trade liberalization in the form of less lumpy trade is shown to expand the role of export and import intermediaries but to have potentially negative effects on the volume of international trade and social welfare in the importing country.