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A quantitative approach to multinational production

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  • Ramondo, Natalia

Abstract

I examine new data on the number and revenues of foreign affiliates of multinational firms across a large number of country pairs. The data shed light on the behavior of the intensive and extensive margins of multinational production (MP). To capture the patterns observed in the data, I build and calibrate a multi-country general-equilibrium model of MP that combines a Lucas (1978) span-of-control with an Eaton and Kortum (2002) type model, and includes both fixed and variable costs of opening affiliates abroad. I use the calibrated model to calculate the gains that a country would experience from liberalizing access to foreign firms. Those calculations suggest that the welfare losses of closing up to foreign firms would be around 4%, while the gains of liberalizing access to foreign firms would be large, particularly if the variable – rather than the fixed – component of MP costs were lowered.

Suggested Citation

  • Ramondo, Natalia, 2014. "A quantitative approach to multinational production," Journal of International Economics, Elsevier, vol. 93(1), pages 108-122.
  • Handle: RePEc:eee:inecon:v:93:y:2014:i:1:p:108-122 DOI: 10.1016/j.jinteco.2014.01.004
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    Cited by:

    1. Pamela Bombarda & Stefania Marcassa, 2014. "Gains from Intra-Firm Trade and Multinational Production," THEMA Working Papers 2014-14, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
    2. Keith Head & Thierry Mayer, 2015. "Brands in Motion: How frictions shape multinational production," Working Papers 2015-26, CEPII research center.
    3. Gomtsyan David, 2016. "Economic Development and the Direction of FDI Flows," Global Economy Journal, De Gruyter, vol. 16(1), pages 91-112, March.
    4. Alviarez, Vanessa & Cravino, Javier & Levchenko, Andrei A., 2017. "The growth of multinational firms in the Great Recession," Journal of Monetary Economics, Elsevier, pages 50-64.
    5. Pamela Bombarda & Stefania Marcassa, 2017. "Intra-Firm Trade, Multinational Production, and Welfare," THEMA Working Papers 2017-15, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
    6. Javier Cravino & Andrei A. Levchenko, 2017. "Multinational Firms and International Business Cycle Transmission," The Quarterly Journal of Economics, Oxford University Press, vol. 132(2), pages 921-962.
    7. Dany Bahar, 2017. "The Hardships of Long Distance Relationships: Knowledge Transmission and the Ease of Communication within Multinational Firms," CID Working Papers 85a, Center for International Development at Harvard University.
    8. Burchardi, Konrad B. & Chaney, Thomas & Hassan, Tarek, 2015. "Migrants, Ancestors, and Investments," CEPR Discussion Papers 11025, C.E.P.R. Discussion Papers.
    9. Latorre, María C. & Yonezawa, Hidemichi, 2017. "Stopped TTIP? Its potential impact on the world and the role of neglected FDI," MPRA Paper 77162, University Library of Munich, Germany.
    10. Anna Gumpert, 2015. "The Organization of Knowledge in Multinational Firms," CESifo Working Paper Series 5401, CESifo Group Munich.
    11. Pamela Bombarda & Stefania Marcassa, 2017. "Welfare and Trade Margins with Multinational Production," THEMA Working Papers 2017-14, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
    12. Gumpert, Anna, 2017. "The Organization of Knowledge in Multinational Firms," Rationality and Competition Discussion Paper Series 29, CRC TRR 190 Rationality and Competition.
    13. Santacreu-Vasut, Estefania & Teshima, Kensuke, 2016. "Foreign employees as channel for technology transfer: Evidence from MNC's subsidiaries in Mexico," Journal of Development Economics, Elsevier, vol. 122(C), pages 92-112.
    14. 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.
    15. Gumpert, Anna, 2015. "The organization of knowledge in multinational firms," Discussion Papers 33/2015, Deutsche Bundesbank.
    16. repec:bla:ecinqu:v:55:y:2017:i:2:p:778-793 is not listed on IDEAS

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