Working Paper

The asymmetric effects of tariffs on intra-firm trade and offshoring decisions

Abstract: This paper studies the effects of tariffs on intra-firm trade. Building on the Antrs and Helpman (2004) North-South theoretical framework, I show that higher Northern tariffs reduce the incentives for outsourcing and offshoring, while higher Southern tariffs have the opposite effects. I also show that increased offshoring and outsourcing imply an increase in the ratio of Northern intra-firm imports to total imports, which is an empirically testable prediction. Using a highly disaggregated dataset of U.S. (the North) imports and relevant tariffs, I find robust evidence to support the model's predictions.

Keywords: Tariff; Contracting out; Trade;

Bibliographic Information

Provider: Federal Reserve Bank of Boston

Part of Series: Working Papers

Publication Date: 2010

Number: 10-4