Trade within multinational boundaries

Laura Alfaro, Paola Conconi, Fariha Kamal and Zachary Kroff

CEP Discussion Papers from Centre for Economic Performance, LSE

Abstract: Traditional theories of firm boundaries predict trade between vertically related units of the same firm. Using novel data that combine a comprehensive mapping of U.S. multinationals' production networks with their customs filings, we uncover a strong positive relationship between input-output linkages and trade between parents and their affiliates. We also find that intrafirm trade is prevalent, particularly between geographically proximate units: three-quarters of affiliates in North America trade with their U.S. parent. These results overturn prior findings based on survey data on intrafirm trade. Administrative intrafirm records enable correcting measurement errors in survey data, reconciling traditional theories with empirical evidence.

Keywords: multinational enterprises; intrafirm trade; input-output linkages (search for similar items in EconPapers)
Date: 2026-02-18
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