Global Sourcing and Multinational Activity: A Unified Approach

Pol Antras, Evgenii Fadeev, Teresa Fort and Felix Tintelnot

No 30450, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Multinational firms (MNEs) accounted for 42 percent of US manufacturing employment, 87 percent of US imports, and 84 of US exports in 2007. Despite their disproportionate share of global trade, MNEs’ input sourcing and final-good production decisions are often studied separately. Using newly merged data on firms’ trade and FDI activity by country, we show that US MNEs are more likely to import not only from the countries in which they have affiliates, but also from other countries within their affiliates’ region. We rationalize these patterns in a unified framework in which firms jointly determine the countries in which to produce final goods, and the countries from which to source inputs. The model generates a new source of scale economies that arises because a firm incurs a country-specific fixed cost that allows all its assembly plants to source inputs from that country. This shared fixed cost across plants creates interdependencies between firms’ assembly and sourcing locations, and leads to non-monotonic responses in third markets to bilateral trade cost changes.

JEL-codes: F1 F12 (search for similar items in EconPapers)
Date: 2022-09
New Economics Papers: this item is included in nep-int
Note: ITI
References: Add references at CitEc
Citations: View citations in EconPapers (8)

Downloads: (external link)
http://www.nber.org/papers/w30450.pdf (application/pdf)

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:nbr:nberwo:30450

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w30450

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().