Trade Disruptions and Reshoring

Chakrabarti, Anindya S.; Mahajan, Kanika; Tomar, Shekhar

doi:10.1257/app.20230270

Abstract

Firms are increasingly concerned about the resilience of their sales and sourcing decisions. Using administrative data, we show that a temporary disruption in trade due to state border closures in India led to a persistent trade collapse within the country—inter-state trade relative to intra-state remains five percent lower even six months after all restrictions were lifted. Reshoring explains this phenomenon as plants more dependent on inter-state sales (input-sourcing) shift from inter- to intra-state sales (input-sourcing). State borders rather than distance are salient in explaining the observed substitution. We propose a novel product-level measure that determines the extent of reshoring.

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Trade Disruptions and Reshoring

Abstract

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