How Wide is the Firm Border?

61 Pages Posted: 11 Sep 2017 Last revised: 20 Jun 2022

See all articles by Enghin Atalay

Enghin Atalay

University of Wisconsin - Madison

Ali Hortacsu

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

Mary Li

University of Chicago - Department of Economics

Chad Syverson

University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER)

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Date Written: September 2017

Abstract

We examine the within- and across-firm shipment decisions of tens of thousands of goods-producing and distributing establishments. This allows us to quantify the normally unobservable forces that determine firm boundaries; which transactions are mediated by ownership control, as opposed to contracts or markets. We find firm boundaries to be an economically significant barrier to trade: having an additional vertically integrated establishment in a given destination zip code has the same effect on shipment volumes as a 40 percent reduction in distance. We then calibrate a multisector trade model to quantify the economy-wide implications of transacting across vs. within firm boundaries.

Suggested Citation

Atalay, Enghin and Hortacsu, Ali and Li, Mary and Syverson, Chad, How Wide is the Firm Border? (September 2017). NBER Working Paper No. w23777, Available at SSRN: https://ssrn.com/abstract=3035128

Enghin Atalay (Contact Author)

University of Wisconsin - Madison

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Ali Hortacsu

University of Chicago - Department of Economics ( email )

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National Bureau of Economic Research (NBER)

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Mary Li

University of Chicago - Department of Economics ( email )

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Chicago, IL 60637
United States

Chad Syverson

University of Chicago - Booth School of Business ( email )

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Chicago, IL 60637
United States

National Bureau of Economic Research (NBER)

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Cambridge, MA 02138
United States

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