The Margins of Global Sourcing: Theory and Evidence from U.S. Firms

49 Pages Posted: 26 Jul 2016 Last revised: 2 Oct 2016

See all articles by Pol Antras

Pol Antras

Harvard University - Department of Economics; National Bureau of Economic Research (NBER)

Teresa Fort

Dartmouth College - Tuck School of Business

Felix Tintelnot

University of Chicago Department of Economics

Multiple version iconThere are 4 versions of this paper

Date Written: July 15, 2016

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.

Suggested Citation

Antras, Pol and Fort, Teresa C. and Tintelnot, Felix, The Margins of Global Sourcing: Theory and Evidence from U.S. Firms (July 15, 2016). Tuck School of Business Working Paper No. 2814682; Becker Friedman Institute for Research in Economics Working Paper No. 2016-18. Available at SSRN: https://ssrn.com/abstract=2814682 or http://dx.doi.org/10.2139/ssrn.2814682

Pol Antras (Contact Author)

Harvard University - Department of Economics ( email )

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Teresa C. Fort

Dartmouth College - Tuck School of Business ( email )

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Felix Tintelnot

University of Chicago Department of Economics ( email )

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