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Multinationals and Structural Transformation

Author

Listed:
  • Vanessa I. Alviarez
  • Cheng Chen
  • Nitya Pandalai-Nayar
  • Liliana Varela
  • Kei-Mu Yi
  • Hongyong Zhang

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 I. Alviarez & Cheng Chen & Nitya Pandalai-Nayar & Liliana Varela & Kei-Mu Yi & Hongyong Zhang, 2022. "Multinationals and Structural Transformation," NBER Working Papers 30494, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:30494
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    Cited by:

    1. Basco, Sergi & Felice, Giulia & Merlevede, Bruno & Mestieri, Martí, 2024. "Financial crises and the global supply network: Evidence from multinational enterprises," Journal of International Economics, Elsevier, vol. 152(C).

    More about this item

    JEL classification:

    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • F44 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Business Cycles

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