Working Paper: NBER ID: w25286
Authors: Giuseppe Berlingieri; Frank Pisch; Claudia Steinwender
Abstract: We study how the technological importance of inputs – measured by cost shares – is related to the decision to “make” or “buy” that input. Using detailed French international trade data and an instrumental variable approach based on self-constructed input-output tables, we show that multinationals vertically integrate high cost share inputs. A stylized incomplete contracting model with both ex-ante and ex-post inefficiencies explains why: technologically more important inputs are “made” when transaction cost economics type forces overpower property rights type forces. However, additional results show that both types forces are needed to explain the full patterns in the data.
Keywords: No keywords provided
JEL Codes: F10; F14; F23; L16; L22; L23; O14
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Technological importance (measured by cost shares) (O33) | vertical integration decision (L22) |
| Higher input cost shares (D33) | more likely to source in-house (L68) |
| TCE forces (F29) | vertical integration decision (L22) |
| PRT forces (P30) | sourcing decision (L24) |
| TCE forces and PRT forces (F29) | sourcing decisions (M11) |