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Externalities from Intra-Firm Trade by U.S. Multinationals

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Abstract

The share of world trade attributed to intra-firm trade is large and fast-growing. This paper offers new information on the welfare outcome of these trends. Two-country evaluations of the gains from international trade were replaced by local welfare measured, not only by the usual per capita income, but also by a newly available index of happiness which incorporates measures for non-economic human welfare. With the aid of large panel data and Hicksian production theory tools, we estimated positive marginal elasticities and a positive elasticity of substitution between intra-firm trade in goods and services. Kernel causality defined in a new R package helped quantify positive externalities from a selected set of 24 variables related to local welfare. Hence, we conclude that multinationals make a positive impact on local welfare.

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Acknowledgments

Authors thank, Emily Walse for her careful editing, Mohammad Azim for his excellent assistance in the production of the paper, and the Editor for numerous helpful suggestions to improve the paper..

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Authors and Affiliations

  1. Economics Department, Fordham University, Bronx, NY, 10458, USA

    Hrishikesh D. Vinod

  2. College of Management, Long Island University, Post Campus, Greenvale, NY, 11548, USA

    P. M. Rao

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  1. Hrishikesh D. Vinod
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  2. P. M. Rao
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Correspondence to Hrishikesh D. Vinod.

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Vinod, H.D., Rao, P.M. Externalities from Intra-Firm Trade by U.S. Multinationals. Int Adv Econ Res 25, 389–397 (2019). https://doi.org/10.1007/s11294-019-09758-z

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