Cross-Product and Cross-Market Adjustments Within Multiproduct Firms: Evidence from Antidumping Actions
Multiproduct firms are responsible for the vast majority of global trade. A prior literature examines how multiproduct firms respond to trade liberalizations that simultaneously affect all of the firms' products and inputs. In contrast, our study uses Chinese firm-product-level export data to examine how an AD action, a very targeted trade policy against a specific product in a specific export destination, affects a multiproduct firms' price and quantity decisions across its other products and export destinations. We find robust evidence for a new phenomenon we call within-firm cross-product trade deflection whereby an AD duty against one of the firm's products in one of its export destinations is associated with reduced prices and increased sales of its other products across all markets. This type of effect depends on increasing costs from joint production within multiproduct firms, something that is often assumed away in many models of the multiproduct firm. We also document for the first time a within-firm chilling effect whereby an AD action in one export destination on a product leads the firm to raise price and lower quantity of the product in other export destinations to lower the risk of AD actions in these other markets.
The authors thank Treb Allen, Carlo Altomonte, Andrew Bernard, Meredith Crowley, Kyle Handley, Olena Ivus, David Jacks, Justin Pierce, Larry Qiu, John Romalis, Peter Schott, Linke Zhu, and participants at the 4th Annual Conference of China Trade Research Group (CTRG) for helpful comments and discussions. Xiaohua Bao acknowledges support from the Social Science Foundation of China (Grant number: 18ZDA069), the National Natural Science Foundation of China (Grant number: 71673177) and the Shanghai Municipal Education Commission (Grant number: 2019-01-07-00-07-E00031). Zhi Yu acknowledges support from the Public Computing Cloud Platform at Renmin University of China. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
Zhi Yu acknowledges the financial support from the Fund for Building World-class Universities (Disciplines) of Renmin University of China (Project No. 297221901121), and that from the Humanities and Social Sciences Research Foundation of China’s Ministry of Education (Project No. 20211JY0003).