WORKING PAPER 10-3

Intra-Firm Trade and Product Contractibility

by Andrew B. Bernard, Tuck School of Business at Dartmouth and NBER
and J. Bradford Jensen, Peterson Institute for International Economics
and Stephen J. Redding, London School of Economics
and Peter K. Schott, Yale School of Management and NBER

May 2010

This paper examines the determinants of intra-firm trade in US 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.

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