Multinational Production and Comparative Advantage  

Oleh:

Alviarez, Vanessa

Jenis: Article from Proceeding
Dalam koleksi: SIBR-Thammasat 2014 Conference on Interdisciplinary Business & Economics Research June 5th- 7th, 2014 di Emerald Hotel Bangkok, page 1-80.
Topik: Multinational Production; Comparative Advantage; Technology Transfer; Sectoral TFP; Welfare
Fulltext: b14-103.pdf (1.26MB)

Isi artikel

This paper first assembles a unique industry-level dataset of foreign affiliate sales to document a new empirical regularity: multinational production is disproportionately allocated to industries where local producers exhibit comparative disadvantage. Then, it shows analytically and quantitatively that multinational production raises average productivity and lowers sectoral productivity dispersion in the host economy. By inducing a larger transfer of technology in sectors where the host economy is relatively less productive, multinational production weakens the host country’s comparative advantage. To measure these channels, this paper incorporates sectoral heterogeneity into a Ricardian general equilibrium model of trade and multinational production. The model is estimated to measure the extent of technology transfers across countries and sectors as well as to quantify the welfare effects of multinational activity. The heterogeneity of foreign affiliate sales across sectors is quantitatively important in accounting for welfare gains from multinational activity. In particular, gains from multinational production are 15 percentage points higher compared with a counterfactual scenario in which foreign affiliate sales are homogeneous across sectors. Furthermore, as a consequence of the impact of multinational production on comparative advantage, gains from trade are about half of what they would be without sectoral heterogeneity in multinational activity (10 percent rather than 19 percent).

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