How Wide Is the Firm Border?

54 Pages Posted: 6 Mar 2019

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 Jialin Li

Compass Lexecon

Chad Syverson

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

Multiple version iconThere are 2 versions of this paper

Date Written: July 27, 2018

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 multi-sector 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 Jialin and Syverson, Chad, How Wide Is the Firm Border? (July 27, 2018). University of Chicago, Becker Friedman Institute for Economics Working Paper No. 2019-34, Available at SSRN: https://ssrn.com/abstract=3347168 or http://dx.doi.org/10.2139/ssrn.3347168

Enghin Atalay

University of Wisconsin - Madison

716 Langdon Street
Madison, WI 53706-1481
United States

Ali Hortacsu

University of Chicago - Department of Economics ( email )

1126 East 59th Street
Chicago, IL 60637
United States
773-702-5841 (Phone)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Mary Jialin Li

Compass Lexecon ( email )

United States

Chad Syverson (Contact Author)

University of Chicago - Booth School of Business ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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