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Trade within Multinational Boundaries

Author

Listed:
  • Laura Alfaro
  • Paola Conconi
  • Fariha Kamal
  • Zachary Kroff

Abstract

We leverage newly linked data from the U.S. Census Bureau and the U.S. Bureau of Economic Analysis to study transactions within U.S. multinational enterprises (MNEs). We show that using administrative data on intrafirm trade allows us to correct for measurement error in survey data and to identify the positive relationship between input-output (IO) linkages and the probability of trade between U.S. parents and their foreign affiliates. We also document the prevalence of intrafirm trade: more than half (three-quarters) of affiliates worldwide (in North America) export to or import from their U.S. parent. Our findings provide strong empirical support for traditional theories of firm boundaries that predict trade between vertically linked units of the same firm, and underscore the importance of accounting for the trade frictions that shape MNEs’ regional supply chains.

Suggested Citation

  • Laura Alfaro & Paola Conconi & Fariha Kamal & Zachary Kroff, 2025. "Trade within Multinational Boundaries," NBER Working Papers 33887, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:33887
    Note: IFM IO ITI
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    More about this item

    JEL classification:

    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance
    • L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General

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