Global Firms: New welfare implications from importing-exporting

This paper examines the role played by global firms that simultaneously import and export in generating welfare gains. In a setting of sequential production where final goods are produced with intermediate goods from different stages of production which are subject to selection into importing and exporting, we show that the presence of importing-exporting can amplify welfare gains from trade under an empirically observable condition: the market share of exporters conditional on also importers is greater than the market share of exporters in the general population. Under the condition that holds when importing and exporting exhibit complementarity, the standard effects of trade liberalization on aggregate outcomes are magnified through disproportionate share reallocations toward most efficient global firms.