The Distribution of Fixed Capital in the Multinational Firm
AbstractBased on industry-level data for majority-owned U.S. foreign affiliates in 49 countries, this paper identifies the determinants of the cross-country distribution of fixed capital within multinational companies. Controlling for market size and trade openness, it is shown that U.S.-owned capital stocks are high in countries with a history of high profitability and low earnings variability. Similarly, the formation of fixed capital is encouraged in host countries with low variable costs, low political risks, and open trade regimes. At the same time, capital expenditures in the late 1990s appear to be insensitive to contemporaneous changes in risk and market shares, underlining investors' sluggish response to the changing characteristics of their host markets. These findings underline the importance of risk in deterring fixed capital expenditures in - and by implication capital flows to - developing countries. Copyright 2002, International Monetary Fund
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Bibliographic InfoArticle provided by Palgrave Macmillan in its journal IMF Staff Papers.
Volume (Year): 49 (2002)
Issue (Month): 1 ()
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Find related papers by JEL classification:
- F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
- D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
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- Eduardo Levy Yeyati & Ugo Panizza & Ernesto H. Stein, 2003.
"The Cyclical Nature of North-South FDI Flows,"
6502, Inter-American Development Bank.
- Eduardo Levy Yeyati & Ugo Panizza & Ernesto H. Stein, 2003. "The Cyclical Nature of North-South FDI Flows," Research Department Publications 4317, Inter-American Development Bank, Research Department.
- Eduardo Levy-Yeyati & Ugo Panizza & Ernesto Stein, 2002. "The Cyclical Nature of North-South FDI Flows," Business School Working Papers quince, Universidad Torcuato Di Tella.
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