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Explaining Tranquility in the Midst of Turbulence: U.S. Multinationals’ Intrafirm Trade, 1966‐1997

Subramanian Rangan


This paper focuses on the causes of and trends in intrafirm trade. It takes into account industry-specific patterns, and discusses implications for the international price index methodology. These issues are approached from the point of view of multinational firms and their strategies. In particular, it appears that specialization can be a driving force in world trade, with implications for both arm's length and intrafirm trade. While it appears intrafirm trade is going to rise in volume, it is less clear if it will be a growing or shrinking portion of total trade. Industry patterns are likely to vary (e.g., auto is highly, if not all, intrafirm), as perhaps will country patterns.