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Outsourcing and pass-through

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

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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Article provided by Elsevier in its journal Journal of International Economics.

Volume (Year): 81 (2010)
Issue (Month): 2 (July)
Pages: 170-183

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Handle: RePEc:eee:inecon:v:81:y:2010:i:2:p:170-183
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