Firms, Contracts, and Trade Structure

56 Pages Posted: 7 Jun 2003 Last revised: 3 Nov 2010

See all articles by Pol Antras

Pol Antras

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

Date Written: June 2003

Abstract

Roughly one-third of world trade is intrafirm trade. This paper starts by unveiling two systematic patterns in the volume of intrafirm trade. In a panel of industries, the share of intrafirm imports in total U.S. imports is significantly higher, the higher the capital intensity of the exporting industry. In a cross-section of countries U.S. imports is significantly higher, the higher the capital-labor ratio of the exporting country. I then show that these patterns can be rationalized in a theoretical framework that combines a Grossman-Hart-Moore view of the firm with a Helpman-Krugman view of international trade. In particular an incomplete-contracting, property-rights model of the boundaries of the firm, which I then incorporate into a standard trade model with imperfect competition and product differentiation. The model pins down the boundaries of multinational firms as well as the international location of production, and it is shown to predict the patterns of intrafirm trade identified above. Econometric evidence reveals that the model is consistent with other qualitative and quantitative features of the data.

Suggested Citation

Antras, Pol, Firms, Contracts, and Trade Structure (June 2003). NBER Working Paper No. w9740. Available at SSRN: https://ssrn.com/abstract=414721

Pol Antras (Contact Author)

Harvard University - Department of Economics ( email )

Littauer Center
Room 230
Cambridge, MA 02138
United States
617-495-1236 (Phone)
617-495-8570 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Register to save articles to
your library

Register

Paper statistics

Downloads
70
Abstract Views
11,338
rank
324,939
PlumX Metrics