The article by Pol Antràs and Elhanan Helpman explores the dynamics of global sourcing and international trade, focusing on the choice between vertical integration and outsourcing. They present a North-South model where differentiated products are developed in the North, and firms in the same sector differ in productivity levels. Firms decide whether to integrate into the production of intermediate inputs or outsource them, and they must choose from which country to source these inputs. The study describes an equilibrium where firms with different productivity levels choose different ownership structures and supplier locations. The authors then analyze how within-sectoral heterogeneity and variations in industry characteristics affect the prevalence of different organizational forms, such as vertical integration, foreign direct investment (FDI), and arm's-length trade. They find that in sectors with low headquarter intensity, firms do not integrate; low-productivity firms outsource in the North, while high-productivity firms outsource in the South. In sectors with high headquarter intensity, all four organizational forms can coexist, but high-productivity firms import inputs in the South via FDI, while low-productivity firms acquire inputs in the North. The model predicts that sectors with higher productivity dispersion or lower headquarter intensity rely more on imported intermediates. The study also examines the effects of wage gaps, trading costs, and other factors on the prevalence of different organizational forms.The article by Pol Antràs and Elhanan Helpman explores the dynamics of global sourcing and international trade, focusing on the choice between vertical integration and outsourcing. They present a North-South model where differentiated products are developed in the North, and firms in the same sector differ in productivity levels. Firms decide whether to integrate into the production of intermediate inputs or outsource them, and they must choose from which country to source these inputs. The study describes an equilibrium where firms with different productivity levels choose different ownership structures and supplier locations. The authors then analyze how within-sectoral heterogeneity and variations in industry characteristics affect the prevalence of different organizational forms, such as vertical integration, foreign direct investment (FDI), and arm's-length trade. They find that in sectors with low headquarter intensity, firms do not integrate; low-productivity firms outsource in the North, while high-productivity firms outsource in the South. In sectors with high headquarter intensity, all four organizational forms can coexist, but high-productivity firms import inputs in the South via FDI, while low-productivity firms acquire inputs in the North. The model predicts that sectors with higher productivity dispersion or lower headquarter intensity rely more on imported intermediates. The study also examines the effects of wage gaps, trading costs, and other factors on the prevalence of different organizational forms.