Input Sourcing and Multinational Production

Stefania Garetto

American Economic Journal: Macroeconomics, 2013, vol. 5, issue 2, 118-51

Abstract: I propose a general equilibrium framework where firms decide whether to outsource or integrate input manufacturing, domestically or abroad. By outsourcing, firms may benefit from suppliers' technologies, but pay mark-up prices. By sourcing intrafirm, they save on mark-ups and pay possibly lower foreign wages. Multinational corporations arise when firms integrate production abroad. The model predicts that intrafirm imports are positively correlated with the mean and variance of the firms' productivity distribution and with the degree of input differentiation. I use the model to quantify the US welfare gains from intrafirm trade, which amount to about 0.23 percent of consumption per-capita. (JEL D21, F12, F23, F41, L11, L24)

JEL-codes: D21 F12 F23 F41 L11 L24 (search for similar items in EconPapers)
Date: 2013
Note: DOI: 10.1257/mac.5.2.118
References: View complete reference list from CitEc
Citations: View citations in EconPapers (43)

Downloads: (external link)
http://www.aeaweb.org/articles.php?doi=10.1257/mac.5.2.118 (application/pdf)
http://www.aeaweb.org/aej/mac/data/2010-0135_data.zip (application/zip)
http://www.aeaweb.org/aej/mac/app/2010-0135_app.pdf (application/pdf)
http://www.aeaweb.org/aej/mac/ds/0502/2010-0135_ds.zip (application/zip)
Access to full text is restricted to AEA members and institutional subscribers.

Related works:
Working Paper: Input Sourcing and Multinational Production (2008)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:aea:aejmac:v:5:y:2013:i:2:p:118-51

Ordering information: This journal article can be ordered from
https://www.aeaweb.org/journals/subscriptions

Access Statistics for this article

American Economic Journal: Macroeconomics is currently edited by Simon Gilchrist

More articles in American Economic Journal: Macroeconomics from American Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by Michael P. Albert ().