Production networks have been extensively developed in East Asia. Previous studies on production networks used international trade data or input-output tables, but such aggregate data cannot explain how the networks actually operate. With the aim of understanding the features and characteristics...

Using a Melitz-style model of heterogeneous firms, Baldwin and Okubo (2006) recently presented a theoretical model in which self-sorting occurs and more productive factories choose to locate in more productive areas. The model suggests that firm-specific factors and regional factors affect each...