The Determinants of Intrafirm Trade: Evidence from French Firms

38 Pages Posted: 21 Feb 2012

See all articles by Gregory Corcos

Gregory Corcos

Norwegian School of Economics (NHH) - Department of Economics

Delphine Irac

Banque de France

Giordano Mion

University of Sussex - Department of Economics; London School of Economics & Political Science (LSE) - Centre for Economic Performance (CEP); Centre for Economic Policy Research (CEPR); CESifo (Center for Economic Studies and Ifo Institute)

Thierry Verdier

Paris School of Economics (PSE); Pontifical Catholic University of Rio de Janeiro (PUC-Rio) - Department of Economics; Centre for Economic Policy Research (CEPR)

Date Written: February 1, 2012

Abstract

How well does the theory of the firm explain the choice between intrafirm and arms' length trade? This paper uses firm-level import data from France to look into this question. We find support for three key predictions of property-rights theories of the multinational firm. Intrafirm imports are more likely: in capital- and skill-intensive firms; in highly productive firms; from countries with well-functioning judicial institutions. We further bridge previous aggregate findings with our investigation by decomposing intrafirm imports into an extensive and intensive margin. Doing so we uncover interesting patterns in the data that require further theoretical investigation.

Keywords: intrafirm trade, outsourcing, firm heterogeneity, incomplete contracts, internationalization strategies, quality of institutions, extensive margin, intensive margin

JEL Classification: F23, F12, F19

Suggested Citation

Corcos, Gregory and Irac, Delphine and Mion, Giordano and Verdier, Thierry, The Determinants of Intrafirm Trade: Evidence from French Firms (February 1, 2012). Banque de France Working Paper No. 362, Available at SSRN: https://ssrn.com/abstract=2008643 or http://dx.doi.org/10.2139/ssrn.2008643

Gregory Corcos (Contact Author)

Norwegian School of Economics (NHH) - Department of Economics ( email )

Helleveien 30
N-5035 Bergen
Norway

Delphine Irac

Banque de France ( email )

Paris
France

Giordano Mion

University of Sussex - Department of Economics ( email )

Falmer, Brighton BN1 9SL
United Kingdom

HOME PAGE: http://sites.google.com/site/giordanomionhp/

London School of Economics & Political Science (LSE) - Centre for Economic Performance (CEP) ( email )

Houghton Street
London WC2A 2AE
United Kingdom

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

CESifo (Center for Economic Studies and Ifo Institute) ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

Thierry Verdier

Paris School of Economics (PSE) ( email )

48 Boulevard Jourdan
Paris, 75014
France

Pontifical Catholic University of Rio de Janeiro (PUC-Rio) - Department of Economics ( email )

Rua Marques de Sao Vicente, 225/206F
Rio de Janeiro, RJ 22453
Brazil

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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