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Exporting, Global Sourcing, and Multinational Activity: Theory and Evidence from the United States

Pol Antràs¹; Evgenii Fadeev²; Teresa C. Fort³; Felix Tintelnot⁴

¹ Harvard University and NBER · ² Duke Fuqua · ³ Dartmouth Tuck, U.S. Census Bureau, and NBER · ⁴ Duke University and NBER

Abstract Multinational firms (MNEs) dominate trade flows, yet their foreign production decisions are often ignored in firm-level studies of exporting and importing. Using newly merged data on U.S. firms’ trade and global production, we show that MNEs are more likely to trade with countries that are proximate to their affiliates. We rationalize these patterns with a new source of firm-level scale economies that arises when fixed costs to source from, or sell in, a market are shared across the MNE’s plants. These shared fixed costs create interdependencies between firms’ production and trade locations that generate third-market responses to trade policy changes.

DOI

10.1162/rest_a_01450

Volume

108 (3)

Pages

553-571

Language

en

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