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The asymmetric effects of tariffs on intra-firm trade and offshoring decisions

  • Díez, Federico J.
Registered author(s):

    This paper studies the effects of tariffs on intra-firm trade. Building on the Antràs and Helpman (2004) North–South theoretical framework, I show that higher Northern tariffs reduce the incentives for outsourcing and offshoring, while higher Southern tariffs have the opposite effects. I also show that increased offshoring and outsourcing imply a decrease in the ratio of Northern intra-firm imports to total imports, an empirically testable prediction. Using a highly disaggregated dataset of U.S. (the North) imports and relevant U.S. and foreign tariffs, I find robust evidence to support the model's predictions.

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    File URL: http://www.sciencedirect.com/science/article/pii/S0022199613001335
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    Article provided by Elsevier in its journal Journal of International Economics.

    Volume (Year): 93 (2014)
    Issue (Month): 1 ()
    Pages: 76-91

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    Handle: RePEc:eee:inecon:v:93:y:2014:i:1:p:76-91
    DOI: 10.1016/j.jinteco.2013.12.004
    Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505552

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    1. Elhanan Helpman, 2006. "Trade, FDI, and the Organization of Firms," Harvard Institute of Economic Research Working Papers 2118, Harvard - Institute of Economic Research.
    2. Heckman, James J. & Navarro, Salvador, 2003. "Using Matching, Instrumental Variables and Control Functions to Estimate Economic Choice Models," IZA Discussion Papers 768, Institute for the Study of Labor (IZA).
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    4. Ian Domowitz & R. Glenn Hubbard & Bruce C. Petersen, 1986. "Market Structure and Cyclical Fluctuations in U.S. Manufacturing," NBER Working Papers 2115, National Bureau of Economic Research, Inc.
    5. Andrew B. Bernard & J. Bradford Jensen & Stephen J. Redding & Peter K. Schott, 2010. "Intra-firm Trade and Product Contractibility (Long Version)," NBER Working Papers 15881, National Bureau of Economic Research, Inc.
    6. Pol Antràs & Elhanan Helpman, 2003. "Global Sourcing," NBER Working Papers 10082, National Bureau of Economic Research, Inc.
    7. Staiger, Robert W. & Antras, Pol, 2008. "Offshoring and the Role of Trade Agreements," Scholarly Articles 3374525, Harvard University Department of Economics.
    8. Pol Antràs & Stephen R.Yeaple, 2013. "Multinational Firms and the Structure of International Trade," NBER Working Papers 18775, National Bureau of Economic Research, Inc.
    9. Pol Antràs, 2003. "Firms, Contracts, and Trade Structure," NBER Working Papers 9740, National Bureau of Economic Research, Inc.
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    11. 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.
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    13. Andrew B. Bernard & J. Bradford Jensen & Stephen J. Redding & Peter K. Schott, 2013. "Intra-Firm Trade And Product Contractibility," Working Papers 13-12, Center for Economic Studies, U.S. Census Bureau.
    14. Stephen Ross Yeaple, 2006. "Offshoring, Foreign Direct Investment, and the Structure of U.S. Trade," Journal of the European Economic Association, MIT Press, vol. 4(2-3), pages 602-611, 04-05.
    15. Emanuel Ornelas & John L. Turner, 2012. "Protection and International Sourcing," Economic Journal, Royal Economic Society, vol. 122(559), pages 26-63, 03.
    16. Nunn, Nathan & Trefler, Daniel, 2013. "Incomplete contracts and the boundaries of the multinational firm," Journal of Economic Behavior & Organization, Elsevier, vol. 94(C), pages 330-344.
    17. Robert E. Hall & Charles I. Jones, 1999. "Why Do Some Countries Produce So Much More Output per Worker than Others?," NBER Working Papers 6564, National Bureau of Economic Research, Inc.
    18. Baier, Scott L. & Bergstrand, Jeffrey H., 2001. "The growth of world trade: tariffs, transport costs, and income similarity," Journal of International Economics, Elsevier, vol. 53(1), pages 1-27, February.
    19. Bombardini, Matilde, 2008. "Firm heterogeneity and lobby participation," Journal of International Economics, Elsevier, vol. 75(2), pages 329-348, July.
    20. Feenstra, Robert C & Hanson, Gordon H, 1996. "Globalization, Outsourcing, and Wage Inequality," American Economic Review, American Economic Association, vol. 86(2), pages 240-245, May.
    21. Koenker,Roger, 2005. "Quantile Regression," Cambridge Books, Cambridge University Press, number 9780521845731, October.
    22. Peter K. Schott, 2004. "Across-Product Versus Within-Product Specialization in International Trade," The Quarterly Journal of Economics, Oxford University Press, vol. 119(2), pages 647-678.
    23. Robert E. Hall & Charles I. Jones, 1999. "Why do Some Countries Produce So Much More Output Per Worker than Others?," The Quarterly Journal of Economics, Oxford University Press, vol. 114(1), pages 83-116.
    24. Ornelas, Emanuel & Turner, John L., 2008. "Trade liberalization, outsourcing, and the hold-up problem," Journal of International Economics, Elsevier, vol. 74(1), pages 225-241, January.
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