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Externalities from Intra-Firm Trade by U.S. Multinationals

Author

Listed:
  • Hrishikesh D. Vinod

    (Fordham University)

  • P. M. Rao

    (Long Island University, Post Campus)

Abstract

The share of world trade attributed to intra-firm trade is large and fast-growing. This paper offers new information on the welfare outcome of these trends. Two-country evaluations of the gains from international trade were replaced by local welfare measured, not only by the usual per capita income, but also by a newly available index of happiness which incorporates measures for non-economic human welfare. With the aid of large panel data and Hicksian production theory tools, we estimated positive marginal elasticities and a positive elasticity of substitution between intra-firm trade in goods and services. Kernel causality defined in a new R package helped quantify positive externalities from a selected set of 24 variables related to local welfare. Hence, we conclude that multinationals make a positive impact on local welfare.

Suggested Citation

  • Hrishikesh D. Vinod & P. M. Rao, 2019. "Externalities from Intra-Firm Trade by U.S. Multinationals," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 25(4), pages 389-397, November.
    • Handle: RePEc:kap:iaecre:v:25:y:2019:i:4:d:10.1007_s11294-019-09758-z
    DOI: 10.1007/s11294-019-09758-z
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    References listed on IDEAS

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    1. David L. Carr & James R. Markusen & Keith E. Maskus, 2021. "Estimating The Knowledge-Capital Model of the Multinational Enterprise," World Scientific Book Chapters, in: BROADENING TRADE THEORY Incorporating Market Realities into Traditional Models, chapter 5, pages 95-110, World Scientific Publishing Co. Pte. Ltd..
    2. Arnaud Costinot & Andrés Rodríguez-Clare, 2018. "The US Gains from Trade: Valuation Using the Demand for Foreign Factor Services," Journal of Economic Perspectives, American Economic Association, vol. 32(2), pages 3-24, Spring.
    3. Holger Breinlich & Anson Soderbery & Greg C. Wright, 2018. "From Selling Goods to Selling Services: Firm Responses to Trade Liberalization," American Economic Journal: Economic Policy, American Economic Association, vol. 10(4), pages 79-108, November.
    4. David E Allen & Vince Hooper, 2018. "Generalized Correlation Measures of Causality and Forecasts of the VIX Using Non-Linear Models," Sustainability, MDPI, vol. 10(8), pages 1-15, August.
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    6. Ricardo, David, 1821. "On the Principles of Political Economy and Taxation," History of Economic Thought Books, McMaster University Archive for the History of Economic Thought, edition 3, number ricardo1821.
    7. Theresa Carpenter, 2005. "Multinationals, intra-firm trade and FDI: A simple model," IHEID Working Papers 01-2005, Economics Section, The Graduate Institute of International Studies.
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    More about this item

    Keywords

    Happiness index; Global sourcing; U.S. foreign subsidiaries; Kernel causality; Nonlinearities;
    All these keywords.

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • F63 - International Economics - - Economic Impacts of Globalization - - - Economic Development
    • C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General

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