Enghin Atalay is an Assistant Professor in the Economics department. He is currently working on one project, titled “How Wide is the Firm Border?”
What is the broad, overarching research agenda that brought you to the WiscRDC?
Broadly, the project has to do with the overarching goal of understanding firms’ vertical integration patterns. In other words: Why do some firms choose to outsource the supply of the inputs that they need, while others produce those inputs in-house? Part of the explanation for why firms produce in house is to avoid the costs associated with transacting with other firms. These costs could be associated with, among other things, searching for, bargaining with, or coordinating with the counterparty. While this explanation has been made before, up to now there has been no systematic assessment of the magnitude of these transaction costs.
What are the specific questions that you are using to pursue this agenda? What do you hope to accomplish?
We attempt to measure these transaction costs. We do so by analyzing data on millions of shipments from tens of thousands of establishments that produce and distribute a variety of products in goods-producing sectors in the U.S. We identify firms’ transaction costs using their revealed choices of what, where, and to whom to ship.
In particular, through the tradeoffs between distance and ownership, firms reveal in their shipment patterns the magnitudes of the costs they perceive in transacting outside their borders. Elsewhere, economists have estimated the costs associated with purchasing from a counterparty that is far away (compared to one that is close by). So, to the extent that firms tend to outsource from a firm that is close by, as opposed to purchasing the same input from a faraway same-firm supplier, one can infer that the transaction costs which we seek to measure are large.
What are the data you are using to pursue these questions?
The project relies on two data sources that can be accessed in the WiscRDC, the Commodity Flow Survey and the Longitudinal Business Database. Both of these data sets are collected and maintained by the U.S. Census. In the Commodity Flow Survey, survey participants are asked about the shipments that they make each week: what is being shipped, along with each shipment’s destination, value, weight, and mode of transportation. The Longitudinal Business Database is an annual enumeration of all of the productive establishments in the U.S. economy, including information on the establishments’ location and firm ownership.
Are you collaborating with any other researchers, in Madison, or otherwise.
The project is with Mary Li, Ali Hortaçsu, and Chad Syverson, all who work at the University of Chicago.
Do you mind sharing the citations for any of your existing scholarly papers or CES Working papers that use data from an RDC?
- “Materials Prices and Productivity,” Journal of the European Economic Association, 2014, 12(3): 575-611.
- “Vertical Integration and Input Flows” (with Ali Hortaçsu and Chad Syverson) American Economic Review, 2014, 104(4): 1120-1148