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Outsourcing and pass-through

  • Hellerstein, Rebecca
  • Villas-Boas, Sofia B

    ()

    (University of California, Berkeley. Dept of agricultural and resource economics and policy)

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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Paper provided by University of California at Berkeley, Department of Agricultural and Resource Economics and Policy in its series CUDARE Working Paper Series with number 1016R3.

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Length: 57 pages
Date of creation: Aug 2006
Date of revision: Feb 2010
Handle: RePEc:are:cudare:1016r3
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