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Federal Reserve Bank of Boston
Working Papers
The asymmetric effects of tariffs on intra-firm trade and offshoring decisions
Federico J. Díez
Abstract

This paper studies the effects of tariffs on intra-firm trade. Building on the Antràs 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.


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Federico J. Díez, The asymmetric effects of tariffs on intra-firm trade and offshoring decisions, Federal Reserve Bank of Boston, Working Papers 10-4, 2010.
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Subject headings:
Keywords: Tariff ; Contracting out ; Trade
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