Greasing the Wheels of International Commerce: How Services Facilitate Firms' International Sourcing

Peter Debaere (), Holger Görg and Horst Raff
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Peter Debaere: University of Virginia

No 4729, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: We use unique plant-level data to study the link between the local availability of services and the decision of manufacturing firms to source materials from abroad. To guide our empirical analysis we develop a monopolistic-competition model of the materials sourcing decisions of heterogeneous firms. The model generates predictions about how the intensity of international sourcing of materials depends on a firm’s productivity and the availability of local services. These predictions are supported by the data. We find evidence that more productive manufacturing firms tend to have a higher ratio of imported materials to sales. In addition, we find evidence that services grease the wheels of international commerce: A greater availability of services across regions, industries and time increases a firm’s foreign sourcing of materials relative to sales. Interestingly, this positive impact of local service availability on imports especially applies to stand-alone firms that, unlike multinationals, are less likely to rely on imported or internally provided services.

Keywords: supply chain management; firm heterogeneity; international trade; off-shoring; services (search for similar items in EconPapers)
JEL-codes: F12 L23 (search for similar items in EconPapers)
Pages: 39 pages
Date: 2010-01
New Economics Papers: this item is included in nep-bec, nep-eff, nep-ifn and nep-int
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

Published - published in: Canadian Journal of Economics, 2013, 46 (1), 78-102

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Related works:
Journal Article: Greasing the wheels of international commerce: how services facilitate firms' international sourcing (2013)
Journal Article: Greasing the wheels of international commerce: how services facilitate firms’ international sourcing (2013)
Working Paper: Greasing the Wheels of International Commerce: How Services Facilitate Firms' International Sourcing (2010)
Working Paper: Greasing the Wheels of International Commerce: How Services Facilitate Firms' International Sourcing (2010)
Working Paper: Greasing the Wheels of International Commerce: How Services Facilitate Firms’ International Sourcing (2010)
Working Paper: Greasing the wheels of international commerce: how services facilitate firms' international sourcing (2010)
Working Paper: Greasing the wheels of international commerce: how services facilitate firms' international sourcing (2010)
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