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Multinational Production and Intra-firm Trade

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  • Alviarez, Vanessa
  • Saad, Ayhab

Abstract

Intra-firm trade, from parents to affiliates, has been combined with standard models of multinational production (MP) to deliver gravity-style predictions for foreign affiliates' sales. Nonetheless, the evidence shows that intra-firm trade is concentrated among a small set of large multinational firms. Using firm-level data from 35 countries, we document that only firms belonging to multinational corporations (MNCs) in the upper tail of the firms size distribution are significantly affected by the distance to their parents. We present a simple framework featuring MNCs selection into intra-firm trade and derive the analytical gravity equations that are consistent with the empirical findings.

Suggested Citation

  • Alviarez, Vanessa & Saad, Ayhab, 2022. "Multinational Production and Intra-firm Trade," IDB Publications (Working Papers) 12525, Inter-American Development Bank.
    • Handle: RePEc:idb:brikps:12525
    DOI: http://dx.doi.org/10.18235/0004566
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    References listed on IDEAS

    as
    1. Thomas Chaney, 2008. "Distorted Gravity: The Intensive and Extensive Margins of International Trade," American Economic Review, American Economic Association, vol. 98(4), pages 1707-1721, September.
    2. Gregory Corcos & Delphine M. Irac & Giordano Mion & Thierry Verdier, 2013. "The Determinants of Intrafirm Trade: Evidence from French Firms," The Review of Economics and Statistics, MIT Press, vol. 95(3), pages 825-838, July.
    3. repec:hal:pseose:halshs-00879809 is not listed on IDEAS
    4. Maria Borga & William J. Zeile, 2004. "International Fragmentation of Production and the Intrafirm Trade of U.s. Multinational Companies," BEA Papers 0035, Bureau of Economic Analysis.
    5. Thomas Chaney, 2008. "Distorted Gravity: The Intensive and Extensive Margins of International Trade," SciencePo Working papers hal-03579844, HAL.
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    8. Natalia Ramondo & Andrés Rodríguez-Clare, 2013. "Trade, Multinational Production, and the Gains from Openness," Journal of Political Economy, University of Chicago Press, vol. 121(2), pages 273-322.
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    Keywords

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    JEL classification:

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

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