The Asymmetric Effects of Tariffs on Intra-Firm Trade and Offshoring Decisions
A subsequent version of this paper is forthcoming in the Journal of International Economics.
This paper studies the effects of tariffs on intra-firm trade. Building on the Antr's and Helpman (2004) North-South theoretical framework, the author shows that higher Northern tariffs reduce the incentives for outsourcing and offshoring, while higher Southern tariffs have the opposite effects. The author also shows that increased offshoring and outsourcing imply a decrease in the ratio of Northern intra-firm imports to total imports, an empirically testable prediction. Using a highly disaggregated dataset of U.S. (the North) imports and relevant U.S. and foreign tariffs, I find robust evidence to support the model's predictions.
This paper was revised in May 2013.