We use a new firm level data set that establishes the location, ownership, and activity of 650,000multinational subsidiaries—close to a comprehensive picture of global multinational activity. Anumber of patterns emerge from the data. Most foreign direct investment (FDI) occurs between richcountries. The share of vertical FDI (subsidiaries which provide inputs to their parent firms) is largerthan commonly thought, even within developed countries. More than half of all vertical subsidiariesare only observable at the four-digit level because the inputs they are supplying are so proximate totheir parent firms' final good that they appear identical at the two-digit level. We call these proximatesubsidiaries 'intra-industry' vertical FDI and find that their location and activity are significantlydifferent to the inter-industry vertical FDI visible at the two-digit level. These subsidiaries are notreadily explained by the comparative advantage considerations in traditional models, where firmslocate their low skill production stages abroad in low skill countries to take advantage of factor costdifferences. We find that overwhelmingly, multinationals tend to own the stages of productionproximate to their final production giving rise to a class of high-skill intra-industry vertical FDI.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
page. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
Publisher Info
Paper provided by Centre for Economic Performance, LSE in its series CEP Discussion Papers with number
dp0825.
Find related papers by JEL classification: F10 - International Economics - - Trade - - - General F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
This paper has been announced in the following NEP Reports:
References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
Antràs, Pol & Helpman, Elhanan, 2004.
"Global Sourcing,"
CEPR Discussion Papers
4170, C.E.P.R. Discussion Papers.
[Downloadable!] (restricted)
Other versions:
Pol Antràs & Elhanan Helpman, 2003.
"Global Sourcing,"
NBER Working Papers
10082, National Bureau of Economic Research, Inc.
[Downloadable!] (restricted)
Grossman, G.M. & Helpman, E., 2002.
"Outsourcing in a Global Economy,"
Papers
218, Princeton, Woodrow Wilson School - Public and International Affairs.
Gene M. Grossman & Elhanan Helpman, 2002.
"Outsourcing in a Global Economy,"
Working Papers
149, Princeton University, Woodrow Wilson School of Public and International Affairs, Discussion Papers in Economics..
[Downloadable!]
Gene M. Grossman & Elhanan Helpman, 2002.
"Outsourcing versus FDI in Industry Equilibrium,"
Working Papers
148, Princeton University, Woodrow Wilson School of Public and International Affairs, Discussion Papers in Economics..
[Downloadable!]
Cited by: (explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)