NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

An Empirical Assessment of the Factor Proportions Explanation of Multi-National Sales

S. Lael Brainard

NBER Working Paper No. 4583
Issued in December 1993
NBER Program(s):   ITI

This paper provides empirical evidence that challenges the factor proportions explanation of multinational activity. The same tests on intra-industry ratios and total volumes that were used to demonstrate that a substantial part of trade is explained by factor proportions and income similarities rather than differences are applied to affiliate sales with surprisingly similar results. Some support for the factor proportions hypothesis is derived by comparing affiliate production destined for export to the parent's market, which is the category of activity most likely to be motivated by factor proportions considerations, with that destined for sale in the local market. Affiliate production destined for export home is moderately more responsive to factor proportions differences. However, the two types of activity differ more in their responses to transport costs and destination market income. Overall, the evidence suggests that only a small part of multinational activity into and out of the U.S. in the late 1980s can be explained by factor proportions differences.

download in pdf format
   (1731 K)

email paper

This paper is available as PDF (1731 K) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w4583

Published: Published as "An Empirical Assessment of the Proximity-Concentration Trade-Off Between Multinational Sales and Trade", American Economic Review, Vol. 87, no. 4 (September 1997): 520-544.

Users who downloaded this paper also downloaded these:
Brainard w4580 An Empirical Assessment of the Proximity-Concentration Tradeoff between Multinational Sales and Trade
Brainard w4269 A Simple Theory of Multinational Corporations and Trade with a Trade-Off Between Proximity and Concentration
Markusen and Venables w11051 A Multi-Country Approach to Factor-Proportions Trade and Trade Costs
Markusen w6231 Trade versus Investment Liberalization
Blonigen, Davies, Waddell, and Naughton w10939 FDI in Space: Spatial Autoregressive Relationships in Foreign Direct Investment
 
Publications
Activities
Meetings
Data
People
About

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

Contact Us