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The determinants of intrafirm trade: Evidence from French firms

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  • Corcos, G.
  • Irac, D.
  • Mion, G.
  • Verdier, T.

Abstract

How well does the theory of the firm explain the choice between intrafirm and arms' length trade? This paper uses firm-level import data from France to look into this question. We find support for three key predictions of property-rights theories of the multinational firm. Intrafirm imports are more likely: (i) in capital- and skill-intensive firms; (ii) in highly productive firms; (iii) from countries with well-functioning judicial institutions. We further bridge previous aggregate findings with our investigation by decomposing intrafirm imports into an extensive and intensive margin. Doing so we uncover interesting patterns in the data that require further theoretical investigation.

Suggested Citation

  • Corcos, G. & Irac, D. & Mion, G. & Verdier, T., 2012. "The determinants of intrafirm trade: Evidence from French firms," Working papers 362, Banque de France.
  • Handle: RePEc:bfr:banfra:362
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    More about this item

    Keywords

    intrafirm trade; outsourcing; firm heterogeneity; incomplete contracts; internationalization strategies; quality of institutions; extensive margin; intensive margin.;

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F19 - International Economics - - Trade - - - Other

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