Trade Disruptions and Reshoring
By Shekhar Tomar, Anindya Chakrabarti, Kanika Mahajan
AEJ: Applied Economics | January 2025
DOI
www.aeaweb.org/articles?id=10.1257/app.20230270
Citation
Tomar, Shekhar., Chakrabarti, Anindya., Mahajan, Kanika. (2024). Trade Disruptions and Reshoring AEJ: Applied Economics www.aeaweb.org/articles?id=10.1257/app.20230270.
Copyright
AEJ: Applied Economics, 2024
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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.