NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Selection, Reallocation, and Spillover: Identifying the Sources of Gains from Multinational Production

Laura Alfaro, Maggie X. Chen

NBER Working Paper No. 18207
Issued in July 2012
NBER Program(s):   IFM   ITI

Quantifying the gains from multinational production has been a vital topic of economic research. Positive productivity gains are often attributed to knowledge spillover from multinational to domestic firms. An alternative, less stressed explanation is …rm selection whereby competition from multinationals leads to market reallocation and survival of only the most productive domestic firms. We develop a model that incorporates both aspects and identify their relative importance in the gains from multinational production by exploring their distinct predictions on domestic productivity and revenue distributions. We show that knowledge spillover shifts both distributions rightward while selection and reallocation raise the left truncation of the distributions and shift revenue leftward. Using a rich firm-level panel dataset that spans 60 countries, we find firm selection and market reallocation constitute an important source of productivity gains while its relative importance varies across nations. Ignoring the role of this source can lead to significant bias in understanding the nature of gains. We also perform counterfactual analysis and quantify both the aggregate and the decomposed welfare effects of multinational production.

You may purchase this paper on-line in .pdf format from SSRN.com ($5) for electronic delivery.

Information about Free Papers

You should expect a free download if you are a subscriber, a corporate associate of the NBER, a journalist, an employee of the U.S. federal government with a ".GOV" domain name, or a resident of nearly any developing country or transition economy.

If you usually get free papers at work/university but do not at home, you can either connect to your work VPN or proxy (if any) or elect to have a link to the paper emailed to your work email address below. The email address must be connected to a subscribing college, university, or other subscribing institution. Gmail and other free email addresses will not have access.

E-mail:

This paper was revised on November 14, 2012

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w18207

Users who downloaded this paper also downloaded these:
Juhn, Ujhelyi, and Villegas-Sanchez w18106 Men, Women, and Machines: How Trade Impacts Gender Inequality
Desai, Foley, and Hines w18107 Trade Credit and Taxes
Feng, Li, and Swenson w18260 The Connection between Imported Intermediate Inputs and Exports: Evidence from Chinese Firms
Chaney and Ossa w18243 Market Size, Division of Labor, and Firm Productivity
Antràs and Yeaple w18775 Multinational Firms and the Structure of International Trade
 
Publications
Activities
Meetings
NBER Videos
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us