The Margins of Global Sourcing:
Theory and Evidence from US Firms†
By Pol Antràs, Teresa C. Fort, and Felix Tintelnot*
We develop a quantifiable multi-
country sourcing model in which
firms self-
select into importing based on their productivity and
country-
specific variables. In contrast to canonical export models
where firm profits are additively separable across destination markets,
global sourcing decisions naturally interact through the firm’s
cost function. We show that, under an empirically relevant condition,
selection into importing exhibits complementarities across source
markets. We exploit these complementarities to solve the firm’s problem
and estimate the model. Comparing counterfactual predictions
to reduced-
form evidence highlights the importance of interdependencies
in firms’ sourcing decisions across markets, which generate
heterogeneous domestic sourcing responses to trade shocks.
(JEL D24, F14, F23, L14, L21)