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Global Sourcing and Multinational Activity: A Unified Approach

Author

Listed:
  • Pol Antràs
  • Evgenii Fadeev
  • Teresa C. Fort
  • Felix Tintelnot

Abstract

Multinational firms (MNEs) accounted for 42 percent of US manufacturing employment, 87 percent of US imports, and 84 of US exports in 2007. Despite their disproportionate share of global trade, MNEs’ input sourcing and final-good production decisions are often studied separately. Using newly merged data on firms’ trade and FDI activity by country, we show that US MNEs are more likely to import not only from the countries in which they have affiliates, but also from other countries within their affiliates’ region. We rationalize these patterns in a unified framework in which firms jointly determine the countries in which to produce final goods, and the countries from which to source inputs. The model generates a new source of scale economies that arises because a firm incurs a country-specific fixed cost that allows all its assembly plants to source inputs from that country. This shared fixed cost across plants creates interdependencies between firms’ assembly and sourcing locations, and leads to non-monotonic responses in third markets to bilateral trade cost changes.

Suggested Citation

  • Pol Antràs & Evgenii Fadeev & Teresa C. Fort & Felix Tintelnot, 2022. "Global Sourcing and Multinational Activity: A Unified Approach," NBER Working Papers 30450, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:30450
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    Cited by:

    1. Brian McCaig & Nina Pavcnik & Woan Foong Wong, 2022. "Foreign and Domestic Firms: Long Run Employment Effects of Export Opportunities," CESifo Working Paper Series 10168, CESifo.
    2. Fabrizio Leone, 2024. "Multinationals, Robots, and the Labor Share," CESifo Working Paper Series 11396, CESifo.
    3. Haishi Li, 2023. "Multinational Production and Global Shock Propagation during the Great Recession," CESifo Working Paper Series 10349, CESifo.
    4. Xian Jiang, 2023. "Information and Communication Technology and Firm Geographic Expansion," CESifo Working Paper Series 10452, CESifo.
    5. Giorgia Giovannetti & Gianluca Santoni & Giulio Vannelli, 2023. "Securing Foreign Markets: Exports, Relational Specificity and New Investment Locations," Working Papers 2023-03, CEPII research center.
    6. Bandick Roger & Karpaty Patrik & Tingvall Patrik, 2024. "Import, Productivity, and Export Performances," Economics - The Open-Access, Open-Assessment Journal, De Gruyter, vol. 18(1), pages 1-17.
    7. Fariha Kamal & Jessica McCloskey & Wei Ouyang, 2022. "Multinational Firms in the U.S. Economy: Insights from Newly Integrated Microdata," Working Papers 22-39, Center for Economic Studies, U.S. Census Bureau.
    8. Fariha Kamal & Jessica McCloskey & Wei Ouyang, 2022. "Multinational Firms in the U.S. Economy: Insights from Newly Integrated Microdata," BEA Working Papers 0202, Bureau of Economic Analysis.

    More about this item

    JEL classification:

    • F1 - International Economics - - Trade
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation

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