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.)
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)
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
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