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on International Activities of Firms |
| By: | Kevin Parra Ramirez (Sciences-Po, Banque de France); Vincent Vicard (CEPII) |
| Abstract: | While multinational enterprises (MNEs) shift hundreds of billions in profits to low-tax jurisdictions annually, how they do remains disputed. Using firm-level data for France in 2018, we provide the first joint quantification of the three main profit-shifting channels: transfer mispricing in goods trade, intangible assets and services traded with tax havens, and intra-firm debt. We find empirical evidence for all three instruments, but transfer mispricing dominates quantitatively (€10 billion, 0.4% of GDP), followed by services (up to €6 billion) and debt (€2 billion). Although significant, these direct estimates account for half of total missing profits in France, as estimated indirectly from the location of MNE profits. We document two key blind spots likely to close this gap: cross-border digital payments by households and understudied debt instruments (e.g., securities). |
| Keywords: | Tax avoidance, Multinational firms, Profit shifting, FDI, Trade |
| JEL: | H26 H25 H32 F14 F23 |
| Date: | 2026–01 |
| URL: | https://d.repec.org/n?u=RePEc:dbp:wpaper:043 |
| By: | Francesca de Nicola; Alexandros Ragoussis; Tim Schmidt-Eisenlohr; Trang Thu Tran |
| Abstract: | Letters of credit are a key trade finance instrument that covers more than 10 percent of global trade, with a notably larger role in low-and middle-income economies. Studying detailed trade data from Viet Nam, we document how letter of credit use varies with firm characteristics. We show that the probability of using a letter of credit is systematically lower for younger, smaller, and foreign-owned trading firms. Importers that are less diversified or have less trading experience are more likely to use letters of credit. Firm characteristics have the strongest effects in markets where information is scarce and enforcement is weak. These patterns are consistent with a model in which the ability to screen trading partners and the cost of bank intermediation vary with firm characteristics, and where a firm’s screening ability and country institutions are substitutes. Any policy or intervention that aims at increasing the use of bank-intermediated trade finance will therefore need to take firm heterogeneity into account. |
| Keywords: | international trade, trade finance, letter-of-credit, firms, development |
| JEL: | F14 F34 O16 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12524 |
| By: | Esteban Jaimovich (University of Turin/Collegio Carlo Alberto); Vincenzo Merella (Prague University of Economics and Business and University of Cagliari) |
| Abstract: | We study how product quality shapes the choice between air and sea freight. In a model with non-homothetic demand and income uncertainty, exporters face a timing wedge: sea shipments must commit quantities before uncertainty resolves, whereas air shipments can be better timed but at higher cost. The model implies a sharp modal sorting for vertically differentiated products: high-quality varieties fly while lower-quality varieties sail. It also predicts that the average air–sea quality gap shrinks as sea routes lengthen relative to air routes. Using U.S. customs data at the exporter–district–product level, and proxying quality with unit values, we confirm both patterns. In addition, leveraging within origin–destination time variation in relative freight costs in a 2SLS design, we show that higher sea costs (relative to air) raise the average unit value of air shipments, consistent with quality sorting. Calibrated counterfactuals show that higher demand volatility reshapes selection in a distance-dependent way, tightening it on short routes while expanding air-based participation on long routes, whereas COVID-type air-freight disruptions and tariff-type marginal-cost shocks disproportionately hit profits for highquality, long-distance exporters, and push marginal exporters to switch from air to sea. |
| Keywords: | International trade; Transportation mode; Unit values |
| JEL: | F1 F14 |
| Date: | 2025–02 |
| URL: | https://d.repec.org/n?u=RePEc:aoz:wpaper:388 |
| By: | Robin Kaiji Gong; Yao Amber Li; Stephen Teng Sun; Shang-Jin Wei |
| Abstract: | While finance theory distinguishes the roles of equity and debt in supporting firm growth, their differential impacts on international trade remain underexplored. This study provides the first empirical analysis of how access to equity financing affects firm exports. We leverage the unique institutional setting in China, where initial public offerings (IPOs) require stringent regulatory approval, ensuring that only qualified firms advance to the final review stage. Our empirical strategy compares the export performance of successful IPO applicants with that of “near misses"—applicants rejected at the final review meetings. To sharpen identification, we utilize meeting records to exclude rejections citing concerns about future revenue growth or profitability risks, as these may entail unobserved shocks to export performance. Our cohort based difference-in-differences analysis reveals that IPO approval leads to a significant annualized increase of more than 6% in firm exports over the subsequent six years. Distinct from previous findings on debt financing, IPO approval primarily affects the extensive margin, enabling firms to expand into more destination-product markets. Mechanism tests suggest that IPOs enhance exports by financing intangible investments and fostering risk-taking activities. |
| JEL: | F1 |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34906 |
| By: | Carsten Eckel; Lisandra Flach; Ning Meng |
| Abstract: | Products produced by multiproduct firms can be linked through demand linkages (cannibalization), supply linkages (joint production), or both. We analyze how these within-firm linkages shape the propagation of shocks - such as tariffs - across products and markets and affect firm performance through changes in markups and marginal costs. Exploiting antidumping duties as firm-product-market specific shocks, we provide evidence of both types of linkages and quantify their relative importance. On average, two-thirds of within-firm linkages arise from demand linkages and one-third from supply linkages, with substantial heterogeneity across industries. We further estimate their effects on markups and marginal costs, showing that roughly 80% of the adjustment occurs through marginal costs and 20% through markups. Our findings indicate that disregarding either type of linkage can lead to sizable misestimations of markups and pass-through rates. |
| Keywords: | multiproduct firms, cannibalization effect, joint production, demand linkages, supply linkages, antidumping duties, markups, marginal costs |
| JEL: | D21 D22 D24 F12 F13 F14 L11 L25 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12530 |