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Outsourcing and Pass-Through

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  • Hellerstein, Rebecca
  • Villas-Boas, Sofia B.

Abstract

A large share of international trade occurs through intra-firm transactions. We show that this common cross-border organization of the firm has implications for the well-documented incomplete transmission of shocks across such borders. We present new evidence of an inverse relationship between a firm’s outsourcing of inputs and its rate of exchange-rate pass-through. We then develop a structural econometric model with final assemblers and upstream parts suppliers to quantify how firms’ organization of their activities across national borders affects their pass-through behavior.

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Bibliographic Info

Paper provided by Department of Agricultural & Resource Economics, UC Berkeley in its series Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series with number qt8098p5nq.

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Date of creation: 01 Feb 2010
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Handle: RePEc:cdl:agrebk:qt8098p5nq

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Keywords: exchange-rate pass-through; intra-firm trade; vertical contracts; outsourcing; Social and Behavioral Sciences; Business;

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References

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  1. Celine Bonnet & Pierre Dubois & Sofia B. Villas Boas & Daniel Klapper, 2013. "Empirical Evidence on the Role of Nonlinear Wholesale Pricing and Vertical Restraints on Cost Pass-Through," The Review of Economics and Statistics, MIT Press, vol. 95(2), pages 500-515, May.
  2. Elhanan Helpman, 2006. "Trade, FDI, and the Organization of Firms," NBER Working Papers 12091, National Bureau of Economic Research, Inc.
  3. Feenstra, Robert C. & Gagnon, Joseph E. & Knetter, Michael M., 1996. "Market share and exchange rate pass-through in world automobile trade," Journal of International Economics, Elsevier, vol. 40(1-2), pages 187-207, February.
  4. Pinelopi Goldberg & Rebecca Hellerstein, 2009. "How Rigid Are Producer Prices?," Working Papers 1184, Princeton University, Department of Economics, Center for Economic Policy Studies..
  5. Villas-Boas, Sofia B., 2006. "Vertical relationships between manufacturers and retailers: inference with limited data," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt0z26d2v9, Department of Agricultural & Resource Economics, UC Berkeley.
  6. Igal Hendel & Aviv Nevo, 2006. "Measuring the Implications of Sales and Consumer Inventory Behavior," Econometrica, Econometric Society, vol. 74(6), pages 1637-1673, November.
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  8. Rauch, James E., 1999. "Networks versus markets in international trade," Journal of International Economics, Elsevier, vol. 48(1), pages 7-35, June.
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  26. Villas-Boas, Sofia & Hellerstein, Rebecca, 2004. "Identification of Supply Models of Retailer and Manufacturer Oligopoly Pricing," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt92x5f4j3, Department of Agricultural & Resource Economics, UC Berkeley.
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Citations

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Cited by:
  1. Bonnet, Céline & Dubois, Pierre & Villas Boas, Sofia B., 2009. "Empirical Evidence on the Role of Non Linear Wholesale Pricing and Vertical Restraints on Cost Pass-Through," IDEI Working Papers 565, Institut d'Économie Industrielle (IDEI), Toulouse, revised Sep 2011.
  2. Brent Neiman, 2009. "A State-Dependent Model of Intermediate Goods Pricing," Working Papers 2010-006, Becker Friedman Institute for Research In Economics.
  3. Adachi, Takanori & Ebina, Takeshi, 2014. "Double marginalization and cost pass-through: Weyl–Fabinger and Cowan meet Spengler and Bresnahan–Reiss," Economics Letters, Elsevier, vol. 122(2), pages 170-175.
  4. Friberg, Richard & Huse, Cristian, 2012. "How to use demand systems to evaluate risky projects, with an application to automobile production," CEPR Discussion Papers 9266, C.E.P.R. Discussion Papers.
  5. ITO Takatoshi & KOIBUCHI Satoshi & SATO Kiyotaka & SHIMIZU Junko, 2013. "Choice of Invoicing Currency: New evidence from a questionnaire survey of Japanese export firms," Discussion papers 13034, Research Institute of Economy, Trade and Industry (RIETI).
  6. Bonnet, Céline & Réquillart, Vincent, 2011. "Tax incidence with strategic firms on the soft drink market," TSE Working Papers 11-233, Toulouse School of Economics (TSE), revised Jul 2012.
  7. Gee Hee Hong & Nicholas Li, 2013. "Market Structure and Cost Pass-Through in Retail," Working Papers 13-5, Bank of Canada.
  8. Nicholas Li & Gee Hee Hong, 2013. "Market Structure and Cost Pass-Through in Retail," Working Papers tecipa-470, University of Toronto, Department of Economics.
  9. Adam Copeland & James A. Kahn, 2012. "Exchange rate pass-through, markups, and inventories," Staff Reports 584, Federal Reserve Bank of New York.

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