The Dynamics of Global Sourcing

Trang T. Hoang
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Trang T. Hoang: https://www.federalreserve.gov/econres/trang-t-hoang.htm

No 1337, International Finance Discussion Papers from Board of Governors of the Federal Reserve System (U.S.)

Abstract: This paper studies an import model that incorporates both static crosscountry interdependence and dynamic dependence in firm-level decisions. I find that the benefit of sourcing from one country increases as a firm imports from more countries. Furthermore, using a partial identification approach under the revealed preferences assumption, I provide evidence for the sunk costs of importing, which make establishing relationships with new sellers costlier than maintaining existing ones. The coexistence of cross-country interdependence and sunk costs implies that temporary trade policy changes can have long-lasting effects on both the targeted and non-targeted markets through firm-level decisions.

Keywords: Intermediate goods; Imports; Sunk costs; Exit and entry; Interdependence; Partial identification (search for similar items in EconPapers)
JEL-codes: F10 L20 (search for similar items in EconPapers)
Date: 2022-02-16
New Economics Papers: this item is included in nep-bec and nep-int
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedgif:1337

DOI: 10.17016/IFDP.2022.1337

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