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How does multinational production affect the measurement of competitiveness?

Author

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  • Stefano Federico

    (Banca d'Italia)

Abstract

This work assembles a unique bilateral dataset on multinational production in the manufacturing sector, in which value added and factor incomes are broken down by location country and by ultimate owner country. Using this dataset, which covers 44 countries over the years 2004-11, we compute measures of production capabilities in which value added is allocated across countries not according to the location of the activity but according to the nationality of the firm or of the factors involved in production (Baldwin and Kimura 1998). These indicators based on the ownership of production are then compared with standard geography-based indicators. This framework is also applied to the analysis of the two modes of supply of foreign markets (exports and FDI) using a common metric based on value added (domestic value added in exports versus value added of foreign affiliates). Overall, the evidence suggests that there are significant differences between geography-based and ownership-based measures, proving that, in an increasingly integrated global economy, ownership matters for the measurement of competitiveness.

Suggested Citation

  • Stefano Federico, 2016. "How does multinational production affect the measurement of competitiveness?," Questioni di Economia e Finanza (Occasional Papers) 301, Bank of Italy, Economic Research and International Relations Area.
    • Handle: RePEc:bdi:opques:qef_301_16
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    File URL: https://www.bancaditalia.it/pubblicazioni/qef/2016-0301/QEF_301_16.pdf
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    References listed on IDEAS

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    Cited by:

    1. Luigi Infante & Tatiana Cesaroni & Riccardo De Bonis, 2020. "Firms' financial surpluses in advanced economies: the role of net foreign direct investments," IFC Bulletins chapters, in: Bank for International Settlements (ed.), Using financial accounts, volume 51, Bank for International Settlements.
    2. Matteo Bugamelli & Silvia Fabiani & Stefano Federico & Alberto Felettigh & Claire Giordano & Andrea Linarello, 2018. "Back on Track? A Macro–Micro Narrative of Italian Exports," Italian Economic Journal: A Continuation of Rivista Italiana degli Economisti and Giornale degli Economisti, Springer;Società Italiana degli Economisti (Italian Economic Association), vol. 4(1), pages 1-31, March.
    3. Sébastien Miroudot & Davide Rigo, 2019. "Preferential Trade Agreements and Multinational Production," RSCAS Working Papers 2019/14, European University Institute.
    4. Tatiana Cesaroni & Riccardo De Bonis & Luigi Infante, 2017. "On the determinants of firms’ financial surpluses and deficits," IFC Bulletins chapters, in: Bank for International Settlements (ed.), Statistical implications of the new financial landscape, volume 43, Bank for International Settlements.
    5. Casella, Bruno, 2019. "Looking through conduit FDI in search of ultimate investors – a probabilistic approach," MPRA Paper 95188, University Library of Munich, Germany.
    6. Bruno Casella, . "Looking through conduit FDI in search of ultimate investors – a probabilistic approach," UNCTAD Transnational Corporations Journal, United Nations Conference on Trade and Development.

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    More about this item

    Keywords

    multinational companies; foreign direct investment; ownership-based competitiveness; global value chains;
    All these keywords.

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General

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