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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.

Suggested Citation

  • Hellerstein, Rebecca & Villas-Boas, Sofia B., 2010. "Outsourcing and pass-through," Journal of International Economics, Elsevier, vol. 81(2), pages 170-183, July.
    • Handle: RePEc:eee:inecon:v:81:y:2010:i:2:p:170-183
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