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American Economic Review Vol. 107 No. 9 2017

The Margins of Global Sourcing: Theory and Evidence from US Firms

Pol Antràs1; Teresa C. Fort2; Felix Tintelnot3

1 Harvard University, 1805 Cambridge Street, Littauer 207, Cambridge, MA 02138, and NBER (email: ) · 2 Tuck School of Business at Dartmouth, 100 Tuck Hall, Hanover, NH 03755, and NBER (email: ) · 3 University of Chicago, 1126 East 59th Street, Chicago, IL 60637, and NBER (email: )

Abstract

We develop a quantifiable multi-country sourcing model in which firms self-select into importing based on their productivity and country-specific variables. In contrast to canonical export models where firm profits are additively separable across destination markets, global sourcing decisions naturally interact through the firm's cost function. We show that, under an empirically relevant condition, selection into importing exhibits complementarities across source markets. We exploit these complementarities to solve the firm's problem and estimate the model. Comparing counterfactual predictions to reduced-form evidence highlights the importance of interdependencies in firms' sourcing decisions across markets, which generate heterogeneous domestic sourcing responses to trade shocks.

DOI
10.1257/aer.20141685
Volume
107
Issue
9
Pages
2514-2564
Language
en
Sources
bibtex:phds-export.bib openalex crossref

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