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The Dynamics of Multinational Activity: Evidence from U.S. Firms


  • Natalia Ramondo


  • Lindsay Oldenski

    (Georgetown University)

  • Stefania Garetto

    (Boston University)


This paper examines how the activities performed by multinational firms change over time. Using a panel of US multinational firms over 25 years from the US Bureau of Economic Analysis, we classify affiliate sales as horizontal, vertical, or export platform based on their destination, and we trace the evolution of these three types of affiliate sales within firms over time. We establish two stylized facts. First, affiliate sales, both to the local market and to other countries, grow very little over the life cycle of the affiliate. Second, affiliates of U.S. multinational firms specialize in a core activity at birth, which persists as the main activity during the life cycle. Some diversification is observed later in life, particularly from horizontal to export activities. Informed by these facts, we propose a dynamic model of multinational production that is consistent with them. The model can be calibrated to shed light on the nature of the costs of multinational activity, which are essential ingredients to quantify the gains from openness arising from multinationals’ operations.

Suggested Citation

  • Natalia Ramondo & Lindsay Oldenski & Stefania Garetto, 2016. "The Dynamics of Multinational Activity: Evidence from U.S. Firms," 2016 Meeting Papers 1431, Society for Economic Dynamics.
  • Handle: RePEc:red:sed016:1431

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    References listed on IDEAS

    1. Fabio Ghironi & Marc J. Melitz, 2005. "International Trade and Macroeconomic Dynamics with Heterogeneous Firms," The Quarterly Journal of Economics, Oxford University Press, vol. 120(3), pages 865-915.
    2. Luca David Opromolla & Alfonso A. Irarrazabal, 2008. "A Theory of Entry and Exit into Exports Markets," Working Papers w200820, Banco de Portugal, Economics and Research Department.
    3. Elhanan Helpman & Marc J. Melitz & Stephen R. Yeaple, 2004. "Export Versus FDI with Heterogeneous Firms," American Economic Review, American Economic Association, vol. 94(1), pages 300-316, March.
    4. Timothy Dunne & J. Bradford Jensen & Mark J. Roberts, 2009. "Introduction to "Producer Dynamics: New Evidence from Micro Data"," NBER Chapters,in: Producer Dynamics: New Evidence from Micro Data, pages 1-12 National Bureau of Economic Research, Inc.
    5. Ramondo, Natalia & Rappoport, Veronica & Ruhl, Kim J., 2016. "Intrafirm trade and vertical fragmentation in U.S. multinational corporations," Journal of International Economics, Elsevier, vol. 98(C), pages 51-59.
    6. Fillat, José L. & Garetto, Stefania & Oldenski, Lindsay, 2015. "Diversification, cost structure, and the risk premium of multinational corporations," Journal of International Economics, Elsevier, vol. 96(1), pages 37-54.
    7. Felix Tintelnot, 2017. "Global Production with Export Platforms," The Quarterly Journal of Economics, Oxford University Press, vol. 132(1), pages 157-209.
    8. Marc J. Melitz, 2003. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," Econometrica, Econometric Society, vol. 71(6), pages 1695-1725, November.
    9. Timothy Dunne & J. Bradford Jensen & Mark J. Roberts, 2009. "Producer Dynamics: New Evidence from Micro Data," NBER Books, National Bureau of Economic Research, Inc, number dunn05-1, September.
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    Cited by:

    1. Mankan M. Koné & Carl Gaigné & Lota D. Tamini, 2017. "Supply Uncertainty and Foreign Direct Investment in Agri-food Industry," Cahiers de recherche CREATE 2017-04, CREATE.

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