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Abstract: This paper studies the effects of trade barriers in the internal and the international organization of firms. It builds on the Antrās and Helpman (2004) North-South model in which firms choose from among four organizational form types corresponding to the combined decisions: outsource vs. integrate, and North vs. South. I show that a tariff imposed by the South on the North country's exports of differentiated final goods does not change (1) the productivity cutoffs at which each organizational form is chosen (2) nor the resulting fraction of firms in each of the four organizational form buckets. However, it decreases the resulting mass of entering firms and worsens the South's country terms of trade. In contrast, a tariff on the South country's exports of inputs decreases the productivity cutoffs for firms operating in the North and increases the thresholds for offshoring firms. Additionally, it not only decreases the fraction of firms that source in the South but also decreases the outsourcing-integration ratio in both countries. Finally, both tariffs result in a reduction of the overall volume of international trade. |
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[UNDER REVISION] This paper studies the effects of tariffs on outsourcing and offshoring. In a similar framework to that developed by Antrās and Helpman (2004) , I consider a two country North-South model where heterogeneous firms simultaneously decide: (1) outsourcing vs. integration, and (2) offshoring vs. domestic production. In contrast to Antrās and Helpman (2004), Northern entrepreneurs possess some critical inputs (such as blueprints) of differentiated goods and look for managers to produce them -- thus, offshoring will imply moving the production of final goods to the South. I show that a decrease in Northern tariffs produces an increase in outsourcing and offshoring. Conversely, a decrease in Southern tariffs reduces both phenomena. Next, these results imply that trade liberalization processes might be able to generate organizational product cycles. Finally, when we consider both tariffs simultaneously, an increase in any of them will reduce the magnitude of the mentioned effects of the other one. |
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This paper studies the effects of tariffs on outsourcing and offshoring. Building on the Antrās and Helpman (2004) North-South theoretical framework, I show that higher Northern tariffs reduce the incentives for both outsourcing and offshoring. Conversely, higher Southern tariffs increase incentives for both phenomena. I also show that increased offshoring and outsourcing imply an increase in the ratio of Northern intra-firm imports to total Northern imports, which is an empirically testable prediction. Using a highly disaggregated dataset of U.S. imports and relevant tariffs, I find robust evidence to support the following predictions of the model: (i) higher U.S. tariffs increase the ratio of American intra-firm imports to total imports; (ii) higher foreign tariffs decrease the same ratio. In the baseline results, I find that a one percentage point increase in the American tariff is associated with a one percentage point increase in the ratio, while a one percentage point increase in the foreign tariff implies a 0.3 percentage point decrease in the ratio. |