Working Paper: NBER ID: w20772
Authors: Pol Antràs; Teresa C. Fort; Felix Tintelnot
Abstract: We develop a quantifiable multi-country sourcing model in which firms self-select into importing based on their productivity and country-specific variables. In contrast to canonical export models where firm profits are additively separable across destination markets, global sourcing decisions naturally interact through the firm's cost function. We show that, under an empirically relevant condition, selection into importing exhibits complementarities across source markets. We exploit these complementarities to solve the firm's problem and estimate the model. Comparing counterfactual predictions to reduced-form evidence highlights the importance of interdependencies in firms' sourcing decisions across markets, which generate heterogeneous domestic sourcing responses to trade shocks.
Keywords: Global Sourcing; Firm-Level Decisions; Trade Patterns; Productivity; Country-Specific Variables
JEL Codes: C63; D21; D22; F12; F23; F61; L11; L16; L23
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| productivity (O49) | sourcing decisions (M11) |
| sourcing decisions (M11) | firm performance (L25) |
| sourcing from multiple countries (F10) | larger and more productive firms (L25) |
| sourcing decisions from one country (F23) | sourcing decisions from another country (F23) |
| demand elasticity and input efficiency (D24) | sourcing decisions (M11) |