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Greasing the wheels of international commerce: how services facilitate firms' international sourcing

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  • Peter Debaere
  • Holger Görg
  • Horst Raff

Abstract

We use plant-level data to study the link between the local availability of services and the decision of manufacturing firms to source materials from abroad. We develop a model to generate predictions about how the intensity of international sourcing of materials depends on the availability of services and firm characteristics. These predictions are supported by the data. Greater availability of services across regions, industries, and time increases firms' foreign sourcing of materials relative to sales. The impact of services differs by firm type. National firms' sourcing responds to changes in regional service conditions, whereas multinationals tend to be less affected.

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Bibliographic Info

Article provided by Canadian Economics Association in its journal Canadian Journal of Economics.

Volume (Year): 46 (2013)
Issue (Month): 1 (February)
Pages: 78-102

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Handle: RePEc:cje:issued:v:46:y:2013:i:1:p:78-102

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References

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  1. Stephen S. Golub & Ronald W. Jones & Henryk Kierzkowski, 2007. "Globalization and Country-Specific Service Links," Journal of Economic Policy Reform, Taylor & Francis Journals, vol. 10(2), pages 63-88.
  2. Robert C. Feenstra, . "Integration Of Trade And Disintegration Of Production In The Global Economy," Department of Economics 98-06, California Davis - Department of Economics.
  3. Breinlich, Holger & Criscuolo, Chiara, 2011. "International trade in services: A portrait of importers and exporters," Journal of International Economics, Elsevier, vol. 84(2), pages 188-206, July.
  4. Melitz, Marc J, 2002. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," CEPR Discussion Papers 3381, C.E.P.R. Discussion Papers.
  5. Helpman, Elhanan, 2006. "Trade, FDI and the Organization of Firms," CEPR Discussion Papers 5589, C.E.P.R. Discussion Papers.
  6. Girma, Sourafel & Gorg, Holger & Strobl, Eric, 2004. "Exports, international investment, and plant performance: evidence from a non-parametric test," Economics Letters, Elsevier, vol. 83(3), pages 317-324, June.
  7. Stephen S. Golub & Ronald W. Jones & Henryk Kierzkowski, 2007. "Globalization and Country-Specific Service Links," Journal of Economic Policy Reform, Taylor and Francis Journals, vol. 10(2), pages 63-88.
  8. Stephen S. Golub, Ronald W. Jones, Henryk Kierzkowski, 2007. "Globalization and Country-Specific Service Links," IHEID Working Papers 05-2007, Economics Section, The Graduate Institute of International Studies.
  9. Antràs, Pol & Helpman, Elhanan, 2004. "Global Sourcing," CEPR Discussion Papers 4170, C.E.P.R. Discussion Papers.
  10. Ottaviano, Gianmarco & Melitz, Marc, 2008. "Market Size, Trade, and Productivity," Scholarly Articles 3229096, Harvard University Department of Economics.
  11. Deardorff, Alan V, 2001. "International Provision of Trade Services, Trade, and Fragmentation," Review of International Economics, Wiley Blackwell, vol. 9(2), pages 233-48, May.
  12. Stephen S. Golub & Ronald W. Jones & Henryk Kierzkowski, 2007. "Globalization and Country-Specific Service Links," RCER Working Papers 532, University of Rochester - Center for Economic Research (RCER).
  13. Kei-Mu Yi, 2000. "Can vertical specialization explain the growth of world trade?," Staff Reports 96, Federal Reserve Bank of New York.
  14. Horst Raff & Nicolas Schmitt, 2009. "Imports, Pass-Through, and the Structure of Retail Markets," Kiel Working Papers 1556, Kiel Institute for the World Economy.
  15. Joseph F. Francois, 1990. "Trade in Producer Services and Returns Due to Specialization under Monopolistic Competition," Canadian Journal of Economics, Canadian Economics Association, vol. 23(1), pages 109-24, February.
  16. Ann E. Harrison & Brian J. Aitken, 1999. "Do Domestic Firms Benefit from Direct Foreign Investment? Evidence from Venezuela," American Economic Review, American Economic Association, vol. 89(3), pages 605-618, June.
  17. Hummels, David & Ishii, Jun & Yi, Kei-Mu, 2001. "The nature and growth of vertical specialization in world trade," Journal of International Economics, Elsevier, vol. 54(1), pages 75-96, June.
  18. Van Long, Ngo & Riezman, Raymond & Soubeyran, Antoine, 2005. "Fragmentation and services," The North American Journal of Economics and Finance, Elsevier, vol. 16(1), pages 137-152, March.
  19. repec:hrv:faseco:4784029 is not listed on IDEAS
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Citations

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Cited by:
  1. João Amador & Sónia Cabral, 2014. "Global Value Chains: Surveying Drivers, Measures and Impacts," Working Papers w201403, Banco de Portugal, Economics and Research Department.
  2. Bianka Dettmer, 2012. "Business services outsourcing and economic growth: Evidence from a dynamic panel data approach," Jena Economic Research Papers 2012-049, Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics.
  3. Horst Raff & Natalia Trofimenko, 2013. "World Market Access of Emerging-Market Firms: the Role of Foreign Ownership and Access to External Finance," Kiel Working Papers 1848, Kiel Institute for the World Economy.

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