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| Title: | | Creasing the wheels of international commerce: How services facilitate firms' international sourcing  |
| Authors: | | Debaere, Peter Görg, Holger Raff, Horst |
| Issue Date: | | 2010 |
| Series/Report no.: | | Discussion paper series // Centre for Economic Policy Research: International trade and regional economics 7675 |
| Abstract: | | We use unique plant-level data to study the link between the local availability of services and the decision of manufacturing firms to source materials from abroad. To guide our empirical analysis we develop a monopolistic-competition model of the materials sourcing decisions of heterogeneous firms. The model generates predictions about how the intensity of international sourcing of materials depends on a firm's productivity and the availability of local services. These predictions are supported by the data. We find evidence that more productive manufacturing firms tend to have a higher ratio of imported materials to sales. In addition, we find evidence that services grease the wheels of international commerce: A greater availability of services across regions, industries and time increases a firm's foreign sourcing of materials relative to sales. Interestingly, this positive impact of local service availability on imports especially applies to stand-alone firms that, unlike multinationals, are less likely to rely on imported or internally provided services. |
| Subjects: | | firm heterogeneity international trade off-shoring services supply chain management |
| JEL: | | F12 L23 |
| Document Type: | | Working Paper |
| Appears in Collections: | | Publikationen von Forscherinnen und Forschern des IfW Economists Online
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