DP7927 Intra-firm Trade and Product Contractibility

Author(s): Andrew B. Bernard, J Bradford Jensen, Stephen J. Redding, Peter K. Schott
Publication Date: July 2010
Keyword(s): Incomplete Contracts, Intermediation, Related party trade
JEL(s): F10, F23, L14, L23
Programme Areas: International Trade and Regional Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=7927

This paper examines the determinants of intra-firm trade in U.S. imports using detailed country-product data. We create a new measure of product contractibility based on the degree of intermediation in international trade for the product. We find important roles for the interaction of country and product characteristics in determining intra-firm trade shares. Intra-firm trade is high for products with low levels of contractability sourced from countries with weak governance, for skill-intensive products from skill-scarce countries, and for capital-intensive products from capital-abundant countries.