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The Determinants of Intrafirm Trade: Evidence from French Firms

  • Gregory Corcos
  • Delphine M. Irac
  • Giordano Mion
  • Thierry Verdier

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.

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Paper provided by Centre for Economic Performance, LSE in its series CEP Discussion Papers with number dp1119.

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Date of creation: Jan 2012
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Handle: RePEc:cep:cepdps:dp1119
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