Working Paper: NBER ID: w31488
Authors: Pol Antràs; Evgenii Fadeev; Teresa C. Fort; Felix Tintelnot
Abstract: Multinational firms (MNEs) dominate trade flows, yet their global production decisions are often ignored in firm-level studies of exporting and importing. Using newly merged data on US firms' trade and multinational activity by country, we show that MNEs are more likely to trade not only with countries in which they have affiliates, but also with other countries within their affiliates' region. We rationalize these patterns with a new source of firm-level scale economies that arises when country-specific fixed costs to source from, or sell in, a market are shared across all the MNE's plants. These shared fixed costs create interdependencies between a firm's production and trade locations that generate third-market responses to bilateral trade policy changes.
Keywords: multinational firms; trade patterns; global value chains
JEL Codes: F1; F2
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| MNEs' presence of affiliates (F23) | MNEs' trade volume (F23) |
| MNEs' affiliates proximity (F23) | MNEs' likelihood to import (F23) |
| shared fixed costs (G31) | MNEs' trade patterns (F23) |
| MNEs' foreign production locations (F23) | MNEs' trade patterns (F23) |