Language, Ethnicity and Intra-firm Trade

Peter Debaere, Hongshik Lee and Joonhyung Lee

No 9029, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We study the significant variation in intrafirm versus arm?s-length trade with micro data. Exploiting the fact that Korean is an uncommon second language and that Korean culture is relatively homogenous, we show how intrafirm sourcing by South Korean affiliates abroad increases with their share of South Korean employees. This positive association is pervasive and nontrivial. Parsing the data more carefully, we find that South Korean employees are primarily high skilled, and that their presence matters for internal trade, not for trade with South Korea per se. The share of South Koreans is also higher in affiliates from nonroutine sectors in host countries that are culturally distant from South Korea. Our empirical evidence thus supports especially Costinot, Oldenski and Rauch (2011)?s view of multinational in-house production for nonroutine activities that require adaptation and internal communication.

Keywords: Intra-firm trade; Multinationals (search for similar items in EconPapers)
JEL-codes: F1 (search for similar items in EconPapers)
Date: 2012-06
New Economics Papers: this item is included in nep-int
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Citations: View citations in EconPapers (2)

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Journal Article: Language, ethnicity and intrafirm trade (2013)
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