NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Mary Jialin Li

Department of Economics
University of Chicago
1126 East 59th Street
Chicago, IL 60637

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NBER Working Papers and Publications

September 2017How Wide Is the Firm Border?
with Enghin Atalay, Ali Horta├žsu, Chad Syverson: w23777
We examine the within- and across-firm shipment decisions of tens of thousands of goods-producing and distributing establishments. This allows us to quantify the normally unobservable forces that determine firm boundaries; which transactions are mediated by ownership control, as opposed to contracts or markets. We find firm boundaries to be an economically significant barrier to trade: having an additional vertically integrated establishment in a given destination zip code has the same effect on shipment volumes as a 40 percent reduction in distance. We then calibrate a multisector trade model to quantify the economy-wide implications of transacting across vs. within firm boundaries.
 
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