Accounting for the Growth of MNC-Based Trade Using a Structural Model of U.S. MNCs
- (pp. 1515-1558)
Abstract
In recent decades, U.S. foreign trade grew much faster than GDP, but there is no consensus why. Notably lacking is an understanding of the role of multinational corporations (MNCs), which mediate over half of world trade. We use Bureau of Economic Analysis data on U.S. MNCs to study the rapid growth of MNC-based trade from 1983 to 1996. Using a model of U.S. MNCs and Canadian affiliates, we decompose this growth by source. Tariff reductions can largely explain increases in arms-length MNC-based trade. But intra-firm trade growth is attributed mostly to technical change. We present additional evidence suggesting just-in-time production facilitated intra-firm trade. (JEL F13, F14, F23)Citation
Feinberg, Susan, E., and Michael P. Keane. 2006. "Accounting for the Growth of MNC-Based Trade Using a Structural Model of U.S. MNCs." American Economic Review, 96 (5): 1515-1558. DOI: 10.1257/aer.96.5.1515Additional Materials
JEL Classification
- F13 Trade Policy; International Trade Organizations
- F14 Empirical Studies of Trade
- F23 Multinational Firms; International Business