U.S. Exports and Multinational Production
This paper presents a monopolistic competition model of trade and multinational production that incorporates asymmetric trade barriers and international differences in production costs. The model predicts the functional form for the dependence of U.S. exports and multinational production on tariffs, distance, and production costs. To deal with simultaneity, we estimate the nonlinear equations of U.S. exports and multinational production simultaneously. In the estimation, we also include country fixed effects and allow for endogenous location choice by firms. The estimation yields reasonable estimates of the structural parameters, including the elasticity of substitution. Based on the estimates, we then simulate the effects of trade liberalization. We find that the elimination of tariffs worldwide would increase U.S. exports by 3.0% and U.S. multinational production by 21.7%. This large expansion of U.S. overseas production mainly results from an expected increase in the number of U.S. foreign affiliates in response to tariff reductions. Copyright by the President and Fellows of Harvard College and the Massachusetts Institute of Technology.
Volume (Year): 88 (2006)
Issue (Month): 3 (August)
|Contact details of provider:|| Web page: http://mitpress.mit.edu/journals/|
|Order Information:||Web: http://mitpress.mit.edu/journal-home.tcl?issn=00346535|
When requesting a correction, please mention this item's handle: RePEc:tpr:restat:v:88:y:2006:i:3:p:531-548. 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: (Kristin Waites)
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.