Excerpt
Excerpt
Trade Policy and Firm Boundaries. Laura Alfaro, January 2010, Paper. "We study how trade policy affects firms’ ownership structures. We first embed a model of vertical integration decisions into a standard perfectly-competitive international trade framework. In the model, integration decisions are driven by a trade-off between the pecuniary benefits of coordinating production decisions and the managers’ private benefits of operating in preferred ways. The price of output is a crucial determinant of this choice, since it affects the size of the pecuniary benefits: higher prices lead to more integration. Through its effect on product prices, trade policy..." Link