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Location Decisions of Heterogeneous Multinational Firms

  • Maggie Xiaoyang Chen


  • Michael Owen Moore


    (Department of Economics/Institute for International Economic Policy, George Washington University)

We examine how multinational Örms with heterogeneous total factor productivity (TFP) self-select into different host countries. Both aggregate- and Örm-level estimates suggest that more productive French Örms are more likely than their less efficient competitors to invest in relatively tough host countries. Countries with a smaller market potential, higher Öxed costs of investment or lower import tariffs tend to have higher cutoff productivities and attract a greater proportion of productive multinationals. This self-selection mechanism remains largely robust when we control for unobserved Örm and country heterogeneity and address the potential TFP endogeneity.

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Paper provided by The George Washington University, Institute for International Economic Policy in its series Working Papers with number 2009-17.

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Length: 33 pages
Date of creation: 2009
Date of revision:
Handle: RePEc:gwi:wpaper:2009-17
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