Advanced Search
MyIDEAS: Login to save this paper or follow this series

Foreign Firms, Distribution of Income, and the Welfare of Developing Countries

Contents:

Author Info

  • Manuel García-Santana

    (ECARES)

Registered author(s):

    Abstract

    I construct a tractable model to investigate the impact of the presence of foreign firms in economies where there exist financial frictions. The cross-country implications of the model are consistent with two facts that I document using plant-level data: (i) foreign firms enter more in economies where domestic entrepreneurs are more financially constrained. (ii) the impact of foreign firms in the plants’ size distribution of the host country is larger in countries where domestic entrepreneurs are more financially constrained. After calibrating the model to account quantitatively for these facts, I use it to evaluate a decrease of barriers to foreign entry. I find that welfare increase only in economies with sufficiently high level of labor income share.

    Download Info

    If you experience problems downloading a file, check if you have the proper application to view it first. 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.
    File URL: http://www.economicdynamics.org/meetpapers/2013/paper_1044.pdf
    Download Restriction: no

    Bibliographic Info

    Paper provided by Society for Economic Dynamics in its series 2013 Meeting Papers with number 1044.

    as in new window
    Length:
    Date of creation: 2013
    Date of revision:
    Handle: RePEc:red:sed013:1044

    Contact details of provider:
    Postal: Society for Economic Dynamics Christian Zimmermann Economic Research Federal Reserve Bank of St. Louis PO Box 442 St. Louis MO 63166-0442 USA
    Fax: 1-314-444-8731
    Email:
    Web page: http://www.EconomicDynamics.org/society.htm
    More information through EDIRC

    Related research

    Keywords:

    References

    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.:
    as in new window
    1. Edward Prescott & Ellen McGrattan, 2008. "Openness, Technology Capital, and Development," 2008 Meeting Papers 111, Society for Economic Dynamics.
    2. Ellen McGrattan, 2012. "Online Appendix to "Transition to FDI Openness: Reconciling Theory and Evidence"," Technical Appendices 12-94, Review of Economic Dynamics.
    3. Francisco J. Buera & Joseph Kaboski & Yongseok Shin, 2009. "Finance and Development: A Tale of Two Sectors," NBER Working Papers 14914, National Bureau of Economic Research, Inc.
    4. repec:hrv:faseco:4784031 is not listed on IDEAS
    5. Laura Alfaro & Maggie Chen, 2011. "Surviving the Global Financial Crisis: Foreign Ownership and Establishment Performance," NBER Working Papers 17141, National Bureau of Economic Research, Inc.
    6. Francisco J. Buera & Joseph Kaboski, 2008. "Scale and the origins of structural change," Working Paper Series WP-08-06, Federal Reserve Bank of Chicago.
    7. POSCHKE, Markus, 2011. "The Firm Size Distribution across Countries and Skill-Biased Change in Entrepreneurial Technology," Cahiers de recherche 08-2011, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
    8. Pol Antràs & Luis Garicano & Esteban Rossi-Hansberg, 2006. "Offshoring in a Knowledge Economy," The Quarterly Journal of Economics, MIT Press, vol. 121(1), pages 31-77, 02.
    9. Robert E. Hall & Charles I. Jones, 1999. "Why Do Some Countries Produce So Much More Output Per Worker Than Others?," The Quarterly Journal of Economics, MIT Press, vol. 114(1), pages 83-116, February.
    10. Albert Bollard & Peter Klenow & Gunjam Sharma, 2013. "India's Mysterious Manufacturing Miracle," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 16(1), pages 59-85, January.
    11. James Tybout, 1999. "Manufacturing Firms in Developing Countries: How Well Do They Do, and Why?," Development and Comp Systems 9906001, EconWPA, revised 10 Jun 1999.
    12. Andres Erosa & Ana Hidalgo, 2007. "On Finance as a Theory of TFP, Cross-Industry Productivity Differences, and Economic Rents," Working Papers tecipa-285, University of Toronto, Department of Economics.
    13. Harrison, Ann E. & McMillan, Margaret S., 2003. "Does direct foreign investment affect domestic credit constraints?," Journal of International Economics, Elsevier, vol. 61(1), pages 73-100, October.
    14. Natalia Ramondo, 2009. "Foreign Plants and Industry Productivity: Evidence from Chile," Scandinavian Journal of Economics, Wiley Blackwell, vol. 111(4), pages 789-809, December.
    15. Hopenhayn, Hugo A, 1992. "Entry, Exit, and Firm Dynamics in Long Run Equilibrium," Econometrica, Econometric Society, vol. 60(5), pages 1127-50, September.
    16. Rauch, James E., 1991. "Modelling the informal sector formally," Journal of Development Economics, Elsevier, vol. 35(1), pages 33-47, January.
    17. Andrew Atkeson & Patrick J. Kehoe, 2005. "Modeling and measuring organization capital," Staff Report 291, Federal Reserve Bank of Minneapolis.
    18. Alexander Monge-Naranjo, 2012. "Foreign firms and the diffusion of knowledge," Working Papers 2012-055, Federal Reserve Bank of St. Louis.
    19. Robert E. Lucas Jr., 1978. "On the Size Distribution of Business Firms," Bell Journal of Economics, The RAND Corporation, vol. 9(2), pages 508-523, Autumn.
    20. Laura Alfaro & Andrew Charlton & Fabio Kanczuk, 2009. "Plant-Size Distribution and Cross-Country Income Differences," NBER Chapters, in: NBER International Seminar on Macroeconomics 2008, pages 243-272 National Bureau of Economic Research, Inc.
    21. Ariel T. Burstein & Alexander Monge-Naranjo, 2009. "Foreign Know-How, Firm Control, and the Income of Developing Countries-super-," The Quarterly Journal of Economics, MIT Press, vol. 124(1), pages 149-195, February.
    22. Ellen R. McGrattan, 2011. "Transition to FDI Openness: Reconciling Theory and Evidence," NBER Working Papers 16774, National Bureau of Economic Research, Inc.
    23. Ann E. Harrison & Brian J. Aitken, 1999. "Do Domestic Firms Benefit from Direct Foreign Investment? Evidence from Venezuela," American Economic Review, American Economic Association, vol. 89(3), pages 605-618, June.
    24. Jonathan Goyette & Giovanni Gallipoli, 2012. "Distortions, Efficiency and the Size Distribution of Firms," Cahiers de recherche 12-06, Departement d'Economique de la Faculte d'administration à l'Universite de Sherbrooke.
    Full references (including those not matched with items on IDEAS)

    Citations

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:red:sed013:1044. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Christian Zimmermann).

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.