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Brands in Motion: How frictions shape multinational production

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  • Head, Keith
  • Mayer, Thierry

Abstract

We use disaggregated data on car assembly and trade to estimate a model of multinational production. Our framework delineates four theory-based specifications under which all frictions relevant to multinational production can be structurally estimated. In addition to the trade costs and multinational production frictions emphasized in past work, we incorporate a third friction: regardless of production origin, it is more difficult to make sales in markets that are geographically separated from the brand's headquarters. The estimation transparently recovers internally consistent estimates of each type of friction cost. With structural parameters in hand, we investigate the consequences of three trade integration experiments: TPP, TTIP, and Brexit. We show that each type of friction makes a qualitative and quantitative difference in the reallocation of production caused by economic integration.

Suggested Citation

  • Head, Keith & Mayer, Thierry, 2015. "Brands in Motion: How frictions shape multinational production," CEPR Discussion Papers 10797, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:10797
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    References listed on IDEAS

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    Cited by:

    1. repec:eee:inecon:v:110:y:2018:i:c:p:135-150 is not listed on IDEAS
    2. Thomas Sampson, 2017. "Brexit: The Economics of International Disintegration," CESifo Working Paper Series 6668, CESifo Group Munich.
    3. Swati Dhingra & Gianmarco Ottaviano & Veronica Rappoport & Thomas Sampson & Catherine Thomas, 2017. "UK Trade and FDI: A Post-Brexit Perspective," CEP Discussion Papers dp1487, Centre for Economic Performance, LSE.
    4. Ronald B. Davies & Zuzanna Studnicka, 2017. "The Heterogeneous Impact of Brexit: Early Indications from the FTSE," CESifo Working Paper Series 6478, CESifo Group Munich.
    5. Sampson, Thomas, 2017. "Brexit: the economics of international disintegration," LSE Research Online Documents on Economics 86591, London School of Economics and Political Science, LSE Library.
    6. Panle Jia Barwick & Shengmao Cao & Shanjun Li, 2017. "Local Protectionism, Market Structure, and Social Welfare: China's Automobile Market," NBER Working Papers 23678, National Bureau of Economic Research, Inc.

    More about this item

    Keywords

    cars; gravity; multinational production model; regional integration; structural estimation;

    JEL classification:

    • F1 - International Economics - - Trade

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