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Multinationals and Structural Transformation

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Abstract

We study how multinational corporations (MNCs) shape firm-level and aggregate structural transformation. Using confidential microdata from Japan and exploiting a quasi-exogenous reform that expanded foreign investment opportunities in China, we assess empirically how this reform affected employment at firms in both the host country (China) and the home country (Japan). In liberalized industries, Japanese manufacturing affiliates in China expanded employment, while parent firms in Japan shifted out of manufacturing and into higher-value service activities, including R&D. To assess the broader relevance of this mechanism, we use microdata from several advanced and middle-income economies, and show that MNCs account for the majority of the middle-income countries' reallocation to manufacturing.

Suggested Citation

  • Vanessa Alviarez & Cheng Chen & Nitya Pandalai-Nayar & Liliana Varela & Kei-Mu Yi & Hongyong Zhang, 2026. "Multinationals and Structural Transformation," Working Papers 2608, Federal Reserve Bank of Dallas.
    • Handle: RePEc:fip:feddwp:102970
    DOI: 10.24149/wp2608
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    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • F60 - International Economics - - Economic Impacts of Globalization - - - General

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