Research / BFI Working PaperJun 29, 2020

Trade and Domestic Production Networks

Felix Tintelnot, Ayumu Ken Kikkawa, Magne Mogstad, Emmanuel Dhyne

We examine how many and what kind of firms ultimately rely on foreign inputs, sell to foreign markets, and are affected by trade shocks. To capture that firms can trade indirectly by buying from or selling to domestic firms that import or export, we use Belgian data with information on both domestic firm-to-firm sales and foreign trade transactions. We find that most firms use a lot of foreign inputs, but only a small number of firms show that dependence through direct imports. While direct exporters are rare, a majority of firms are indirectly exporting. In most firms, however, indirect export is quantitatively modest, and sales at home are the key source of revenue. We show that what matters for the transmission of foreign demand shocks to a firm’s revenue is how much the firm ultimately sells to foreign markets, not whether these sales are from direct or indirect export.

More Research From These Scholars

BFI Working Paper Sep 8, 2020

Reservation Wages and Workers’ Valuation of Job Flexibility: Evidence from a Natural Field Experiment

Kuan-Ming Chen, Ning Ding, John List, Magne Mogstad
BFI Working Paper Jul 20, 2020

Policy Evaluation with Multiple Instrumental Variables

Magne Mogstad, Alexander Torgovitsky, Christopher R. Walters
BFI Working Paper Dec 17, 2020

Do Employees Benefit from Worker Representation on Corporate Boards?

Christine Blandhol, Magne Mogstad, Peter Nilsson, Ola L.Vestad