DP7530 The Determinants of Intra-Firm Trade

Author(s): Gregory Corcos , Delphine Irac , Giordano Mion , Thierry Verdier

Publication Date: November 2009

Keyword(s): extensive margin , firm heterogeneity , incomplete contracts , intensive margin , internationalization strategies , intra-firm trade , outsourcing , quality of institutions

JEL(s): F12 , F19 , F23

Programme Areas: International Trade and Regional Economics

Link to this Page: www.cepr.org/pubs/dps/DP7530.asp

How successful is the theory of the firm in explaining intra-firm trade? To answer this question we exploit a unique dataset of 1,141,393 French import transactions, spanning across firm, countries and products in 1999, and reporting whether a transaction is intra-firm. Overall, we find support for the main predictions of the partial equilibrium property-rights approach and further deliver facts that can be useful for further theoretical development. We document substantial within-industry heterogeneity while providing evidence of the importance of the firm dimension of sourcing choices as well as of the key distinction between the extensive and intensive margins.