-
Gains from Offshoring? Evidence from U.S. Microdata
April 2013
Working Paper Number:
CES-13-20
We construct a new linked data set with over one thousand offshoring events by matching Trade Adjustment Assistance program petition data to micro-data from the U.S. Census Bureau. We exploit this data to assess how offshoring impacts domestic firm-level aggregate employment, output, wages and productivity. A class of models predicts that more productive firms engage in offshoring, and that this leads to gains in output and (measured) productivity, and potential gains in employment and wages, in the remaining domestic activities of the offshoring firm. Consistent with these models, we find that offshoring firms are on average larger and more productive compared to non-offshorers. However, we find that offshorers suffer from a large decline in employment (32 per cent) and output (28 per cent) relative to their peers even in the long run. Further, we find no significant change in average wages or in total factor productivity measures at affected firms. We find these results robust to a variety of checks. Thus we find no evidence for positive spillovers to the remaining domestic activity of firms in this large sampleof offshoring events.
View Full
Paper PDF
-
INTRA-FIRM TRADE AND PRODUCT CONTRACTIBILITY
March 2013
Working Paper Number:
CES-13-12
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 contractibility sourced from countries with weak governance, for skill-intensive products from skill-scarce countries, and for capital-intensive products from capital-abundant countries.
View Full
Paper PDF
-
Product Quality and Firm Heterogeneity in International Trade
March 2013
Working Paper Number:
CES-13-08
I develop and implement a methodology for obtaining plant-level estimates of product quality from revenue and physical output data. Intuitively, firms that sell large quantities of output conditional on price are classified as high quality producers. I use this method to decompose cross-plant variation in price and export status into a quality and an efficiency margin. The empirical results show that prices are increasing in quality and decreasing in efficiency. However, selection into exporting is driven mainly by quality. The finding that changes in quality and efficiency have different impact on the firm's export decision is shown to be inconsistent with the traditional iceberg trade cost formulation and points to the importance of per unit transport costs.
View Full
Paper PDF
-
Decomposing Aggregate Trade Flows: New Evidence from U.S. Traders
September 2012
Working Paper Number:
CES-12-17
Using firm-level data on export transactions, we uncover a rich set of results about the extensive margins of exporting and exporter responses during periods of global downturns. We perform our analysis with respect to firm size, age, ownership status, and sector to emphasize the role of firm heterogeneity. We uncover a larger role for firm entry and exit in changes in annual export flows of single-unit, smaller, and younger firms. Young, small firms perform best during both periods of crises as well as non-crises periods. We also decompose the margins of U.S. imports at the U.S. importer, foreign supplier, and U.S. importer-foreign supplier pair levels. While export flows are closely correlated with global business cycles, import flows more closely approximate U.S. economic cycles. Additionally, both pair and foreign supplier flows are far more volatile than U.S. import flows, that is, U.S. importer-foreign supplier matches experience more churning on average than do either U.S. importers or foreign suppliers.
View Full
Paper PDF
-
Wholesalers and Retailers in U.S. Trade (Long Version)
February 2012
Working Paper Number:
CES-12-03
International trade models typically assume that producers in one country trade directly with final consumers in another. In reality, of course, trade can involve long chains of potentially independent actors who move goods through wholesale and retail distribution networks. These networks likely affect the magnitude and nature of trade frictions and hence both the pattern of trade and its welfare gains. To promote further understanding of the means by which goods move across borders, this paper examines the extent to which U.S. exports and imports flow through wholesalers and retailers versus producing and consuming firms.
View Full
Paper PDF
-
Export Prices of U.S. Firms
December 2011
Working Paper Number:
CES-11-42
Using confidential firm-level data from the United States in 2002, we show that exporting firms charge prices for narrowly defined goods that differ substantially with the characteristics of firms and export markets. We control for selection into export markets using a three-stage estimator. We have three main results. First, we find that that highly productive and skill intensive firms charge higher prices, while capital-intensive firms charge lower prices. Second, the very large correlation between distance and export prices found by Baldwin and Harrigan (2011) is largely due to a composition effect. Third, U.S. firms charge slightly higher prices to larger and richer markets, and substantially higher prices to markets other than Canada and Mexico.
View Full
Paper PDF
-
Entry Costs and Increasing Trade
December 2011
Working Paper Number:
CES-11-38R
Using confidential microdata from the US Census, we find that the fraction of manufacturing plants that export rose from 21% in 1987 to 39% in 2006. It has been suggested that similar trends in other countries may have been caused by declining costs of entering foreign markets. Our study tests this hypothesis for the first time. Both reduced form and structural estimation approaches find little evidence that entry costs declined significantly for US firms over this period. Despite the large literature on changes in variable costs to trade such as tariffs, our estimations represent the first analysis of how the costs of entering foreign markets have changed over time.
View Full
Paper PDF
-
The Productivity Advantage and Global Scope of U.S. Multinational Firms
August 2011
Working Paper Number:
CES-11-23
This paper examines whether the productivity of U.S. business establishments is related to the extent to which their parent firms are globally engaged--from being an exporter to being a fledgling multinational that has taken a few cautious forays into foreign markets to being a seasoned multinational with extensive foreign operations. Theory suggests that multinationals possess proprietary assets that confer a productivity advantage over their domestically-oriented rivals, and that this advantage is positively correlated with the global scope of a firm's operations. That is, those firms with the greatest productivity advantage are able to absorb the costs and overcome the risks of operating in a wide range of foreign countries, from those where it is relatively riskfree and economical to operate, to those where it is risky, difficult, and costly. This connection between the multinational's widening of its geographic scope of operations and its productivity can be self-reinforcing. Once a multinational has successfully operated in a risky environment, it may benefit from learning effects that can lower the cost and risk of further enlargement of geographic scope. The positive correlation between a firm's global engagement and its level of productivity has already been demonstrated. This paper extends that research by testing whether the correlation holds up when productivity is measured at the level of the individual establishment, rather than at the level of the consolidated business enterprise. It also examines whether the correlation between global engagement and productivity exists in non-manufacturing industries. Finally, it examines whether linkages between the multinational's domestic and foreign operations, in the form of imports of goods by the parent company from its foreign affiliates, enhance the productivity of the multinational's domestic business establishments. The findings confirm the positive correlation between global scope and productivity and demonstrate that it holds for both manufacturing and non-manufacturing industries. The effect of imports of goods from foreign affiliates on the productivity of the establishments of their parent firm depend on the geographic location of the affiliates: Imports from affiliates in high-income countries tend to be associated with high productivity whereas those from affiliates in low-income countries tend to be associated with low productivity. The study was made possible by combining BEA enterprise-level data on the U.S. operations of U.S. multinational firms with data on all U.S. business establishments collected by the Census Bureau in the U.S. economic census covering 2002.
View Full
Paper PDF
-
Exports, Borders, Distance, and Plant Size
June 2010
Working Paper Number:
CES-10-13
The fact that large manufacturing plants export relatively more than small plants has been at the foundation of much work in the international trade literature. We examine this fact using Census micro data on plant shipments from the Commodity Flow Survey. We show the fact is not entirely an international trade phenomenon; part of it can be accounted for by the effect of distance, distinct from any border effect. Export destinations tend to be further than domestic destinations, and large plants tend to ship further distances even to domestic locations, as compared with small plants. We develop an extension of the Melitz (2003) model and use it to set up an analysis with model interpretations of ratios between large plant and small plant shipments that can be calculated with the data. We obtain a decomposition of the overall ratio into a term that varies with distance, holding fixed the border, and a term that varies with the border, holding fixed the distance. The distance term accounts for more than half of the overall difference.
View Full
Paper PDF
-
Pollution Havens and the Trade in Toxic Chemicals: Evidence from U.S. Trade Flows
June 2010
Working Paper Number:
CES-10-12
Does increased environmental protection decrease the emission of pollutants or merely displace them? Using newly available trade data, this study examines the flows of a panel of chemicals designated as toxic by the U.S. Environmental Protection Agency's Toxics Release Inventory (TRI). Estimates from a differences-in-differences model indicate a significant increase in net imports when a chemical is listed on TRI, which suggests production offshoring. Furthermore, I find that increased imports due to this 'pollution haven effect' are sourced disproportionately from poorer countries, which are likely to have lower environmental protection standards. At the same time, I observe the bulk of American trade in toxic chemicals occurs with other wealthy countries, which may be attributed to the capital intensity of chemical production.
View Full
Paper PDF
