Economic policy uncertainty, contracting frictions and imports sourcing decisions

Jie Li

Economics Letters, 2021, vol. 200, issue C

Abstract: This paper studies whether economic policy uncertainty could interact with contracting frictions to jointly affect importers’ choice to source from integrated parties or external parties. Using Related Party Trade dataset for the US, Economic Policy Uncertainty dataset by Baker et al. (2016) and contract intensity constructed by Nunn (2007), we find that US importers in high contract intensity industries would respond to increased economic policy uncertainty by increasing intra-firm trade share. Particularly, the intra-firm imports share would increase by 4.87% compared to the mean when the EPU and the contract intensity both rise from 10th to 90th percentile. In addition, we find that this effect is more pronounced for developing countries.

Keywords: Economic policy uncertainty; Contract intensity; Input sourcing; Intra-firm trade (search for similar items in EconPapers)
JEL-codes: F14 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0165176521000495
Full text for ScienceDirect subscribers only

Related works:
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:eee:ecolet:v:200:y:2021:i:c:s0165176521000495

DOI: 10.1016/j.econlet.2021.109772

Access Statistics for this article

Economics Letters is currently edited by Economics Letters Editorial Office

More articles in Economics Letters from Elsevier
Bibliographic data for series maintained by Catherine Liu ().