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Intra-firm Trade and Contract Completeness: Evidence from Japanese affiliate firms

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  • MATSUURA Toshiyuki
  • ITO Banri

Abstract

The issue on the growth and its variation of intra-firm trade of intermediate inputs is of great interest in international economics. This paper examines the determinants of intra-firm trade by shedding light not only on factor price and trade cost but also on the organizational form in terms of the ownership of oversea plant and control over intermediate input for further processing, using micro data at the affiliate firm level. In the empirical analysis, since organizational form and intra-firm trade are jointly determined, we adopted instrumental variable regression treating a choice of purchasing manager as an endogenous variable. The results suggest that control over input decisions critically affect intra-firm trade of intermediate input.

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Bibliographic Info

Paper provided by Research Institute of Economy, Trade and Industry (RIETI) in its series Discussion papers with number 09026.

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Length: 28 pages
Date of creation: Jun 2009
Date of revision:
Handle: RePEc:eti:dpaper:09026

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  1. Andrei A. Levchenko, 2004. "Institutional Quality and International Trade," IMF Working Papers 04/231, International Monetary Fund.
  2. Gene M. Grossman & Elhanan Helpman, 2002. "Managerial Incentives and the International Organization of Production," Harvard Institute of Economic Research Working Papers 1987, Harvard - Institute of Economic Research.
  3. Kiyota, Kozo & Matsuura, Toshiyuki & Urata, Shujiro & Wei, Yuhong, 2008. "Reconsidering the Backward Vertical Linkages of Foreign Affiliates: Evidence from Japanese Multinationals," World Development, Elsevier, vol. 36(8), pages 1398-1414, August.
  4. Robert C. Feenstra & Gordon H. Hanson, 2004. "Ownership and Control in Outsourcing to China: Estimating the Property-Rights Theory of the Firm," NBER Working Papers 10198, National Bureau of Economic Research, Inc.
  5. Gordon H. Hanson & Raymond J. Mataloni & Matthew J. Slaughter, 2005. "Vertical Production Networks in Multinational Firms," The Review of Economics and Statistics, MIT Press, vol. 87(4), pages 664-678, November.
  6. Belderbos, Rene & Capannelli, Giovanni & Fukao, Kyoji, 2001. "Backward Vertical Linkages of Foreign Manufacturing Affiliates: Evidence from Japanese Multinationals," World Development, Elsevier, vol. 29(1), pages 189-208, January.
  7. Slaughter, Matthew J., 2000. "Production transfer within multinational enterprises and American wages," Journal of International Economics, Elsevier, vol. 50(2), pages 449-472, April.
  8. Nathan Nunn, 2005. "Relationship Specificity, Incomplete Contracts and the Pattern of Trade," International Trade 0512018, EconWPA.
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