Beschreibung:
Firms are increasingly concerned about the resilience of their sales and sourcing decisions as conflicts, natural disasters, and labor disputes frequently disrupt trade. Using administrative tax 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 4% lower even six months after all the restrictions were lifted. We show that reshoring explains this phenomenon as plants more dependent on inter-state sales (input-sourcing) shift from inter- to intra-state sales (input-sourcing). We find that state borders rather than distance are salient in explaining the observed reshoring. Finally, we propose a novel product-level measure, incorporating demand and supply characteristics, that determines the extent of reshoring