Working Paper: NBER ID: w9740
Authors: Pol Antràs
Abstract: Roughly one-third of world trade is intrafirm trade. This paper starts by unveiling two systematic patterns in the volume of intrafirm trade. In a panel of industries, the share of intrafirm imports in total U.S. imports is significantly higher, the higher the capital intensity of the exporting industry. In a cross-section of countries U.S. imports is significantly higher, the higher the capital-labor ratio of the exporting country. I then show that these patterns can be rationalized in a theoretical framework that combines a Grossman-Hart-Moore view of the firm with a Helpman-Krugman view of international trade. In particular an incomplete-contracting, property-rights model of the boundaries of the firm, which I then incorporate into a standard trade model with imperfect competition and product differentiation. The model pins down the boundaries of multinational firms as well as the international location of production, and it is shown to predict the patterns of intrafirm trade identified above. Econometric evidence reveals that the model is consistent with other qualitative and quantitative features of the data.
Keywords: No keywords provided
JEL Codes: D23; F12; F14; F21; F23; L22; L33
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| capital intensity (E22) | share of intrafirm imports (F23) |
| capital-labor ratio (J24) | share of intrafirm imports (F23) |
| capital intensity (E22) | propensity for intrafirm trade (F12) |
| capital-labor ratio (J24) | propensity for intrafirm trade (F12) |