Publications
"The Growth of Multinational Firms in the Great Recession", August 2016, with Javier Cravino and Andrei Levchenko. Forthcoming, Journal of Monetary Economics, (Carnegie-Rochester-NYU Series).
We use a large firm-level dataset to study the performance of multinational firms across multiple countries during the Great Recession. We document that the foreign affiliates of multinational firms grew faster than local firms both before and after the crisis, but that this rapid growth was interrupted in the crisis. We disentangle the mechanisms accounting for this decline in multinational activity. Much of the slowdown can be explained by industry and size differences between domestic and foreign-owned firms. We show, however, that multinational firms from different source countries had different experiences during the crisis. Building on these results, we use a quantitative model of multinational production to assess the role of multinational firms in the global recession. Had multinationals’ performance relative to domestic firms remained unchanged during the crisis, the median country’s aggregate growth would have been 0.12% higher. The impact is heterogeneous across countries, ranging from -0.13 to 0.5%.
We use a large firm-level dataset to study the performance of multinational firms across multiple countries during the Great Recession. We document that the foreign affiliates of multinational firms grew faster than local firms both before and after the crisis, but that this rapid growth was interrupted in the crisis. We disentangle the mechanisms accounting for this decline in multinational activity. Much of the slowdown can be explained by industry and size differences between domestic and foreign-owned firms. We show, however, that multinational firms from different source countries had different experiences during the crisis. Building on these results, we use a quantitative model of multinational production to assess the role of multinational firms in the global recession. Had multinationals’ performance relative to domestic firms remained unchanged during the crisis, the median country’s aggregate growth would have been 0.12% higher. The impact is heterogeneous across countries, ranging from -0.13 to 0.5%.
Work in pAPERS
"Multinational Production and Comparative Advantage", last version, July 2017
This paper assembles a novel industry-level dataset of bilateral foreign affiliate sales to document two new empirical regularities: 1) the sectoral dispersion patterns of multinational activity are significantly heterogeneous across countries; and 2) multinational production (MP) is disproportionately allocated in industries where local producers are relatively less productive. To account for these facts, this paper incorporates a sectoral Ricardian framework into a general equilibrium model of trade and MP in order to show analytically and quantitatively, the extent at which the dispersion of relative sectoral productivities---measured by the Atkinson inequality index---as well as the barriers to MP, accounts for the magnitude, sectoral allocation and the welfare impact of multinational production. The paper shows that by ignoring sectoral heterogeneities, one-sector models systematically understates the welfare gains from MP and openness. In particular, gains from openness are three times higher in a multi-sector model compare to a one-sector framework; and 14 percent higher compared to a counterfactual scenario without differences in relative productivity across sectors. This paper also shows that gains from trade are decreasing in the sectoral dispersion of MP shares, as MP erodes sectoral level Ricardian comparative advantages and therefore inter-industry trade. In a counterfactual scenario in which MP does not affect relative differences in effective productivities, gains from trade are almost 12 percent lower than in equilibrium. Finally, the paper shows a significant welfare impact of MP in the non-tradable sector. In particular, when MP is prohibitively costly in non-tradable goods, real income decreases by 8 percent and gains from openness decline by 35 percent. Moreover, losing access to non-tradable intermediate inputs produced by foreign affiliates causes an increase of 2.45 percent in the price index of tradables and an increase in the overall price index of 5.7 percent.
“Multinational Production and Intra-firm Trade”, with Ayhab Saad, (updated version coming soon).
Intra-flows of goods from U.S multinational parents to their cross-border network of affiliates account for 20 percent of U.S. exports. In spite of the fact that intra-firm trade flows are large as a fraction of total trade; they represent only a small fraction of affiliate sales for the median multinational firm regardless of the destination country or the industry of operation (Ramondo et al., 2012). To account for the extensive margin of intra-firm trade flows, we develop a model of heterogeneous firms, in which parent firms can optimally chose to produce and export intermediate inputs to their affiliates abroad or instead let their affiliates to produce these inputs in the host market. Unlike previous approaches, our model matches the distribution of intra-firm trade patterns observed in the data: the least productive affiliates do not import at all from their parent firm, while only the most productive ones engage in intra-firm trade. Using this framework, we evaluate the impact of idiosyncratic firm's specific shocks on aggregate outcomes, in an economy where production and trade--both intra-firm and arms' length--is concentrated among a small number of large multinational corporations.
“The Employment Effects of Multinational Corporations”, with Nicholas Bloom, Kyle Handley, Sui-Jade Ho and Brian Lucking, (draft coming soon).
This paper studies the employment effects of multinational corporations in the U.S..This project details the dynamics of employment across firms, industries, and regions using a novel combination of international corporate ownership data matched to extremely detailed Census micro data spanning firms, workers and trade-transactions.
This paper assembles a novel industry-level dataset of bilateral foreign affiliate sales to document two new empirical regularities: 1) the sectoral dispersion patterns of multinational activity are significantly heterogeneous across countries; and 2) multinational production (MP) is disproportionately allocated in industries where local producers are relatively less productive. To account for these facts, this paper incorporates a sectoral Ricardian framework into a general equilibrium model of trade and MP in order to show analytically and quantitatively, the extent at which the dispersion of relative sectoral productivities---measured by the Atkinson inequality index---as well as the barriers to MP, accounts for the magnitude, sectoral allocation and the welfare impact of multinational production. The paper shows that by ignoring sectoral heterogeneities, one-sector models systematically understates the welfare gains from MP and openness. In particular, gains from openness are three times higher in a multi-sector model compare to a one-sector framework; and 14 percent higher compared to a counterfactual scenario without differences in relative productivity across sectors. This paper also shows that gains from trade are decreasing in the sectoral dispersion of MP shares, as MP erodes sectoral level Ricardian comparative advantages and therefore inter-industry trade. In a counterfactual scenario in which MP does not affect relative differences in effective productivities, gains from trade are almost 12 percent lower than in equilibrium. Finally, the paper shows a significant welfare impact of MP in the non-tradable sector. In particular, when MP is prohibitively costly in non-tradable goods, real income decreases by 8 percent and gains from openness decline by 35 percent. Moreover, losing access to non-tradable intermediate inputs produced by foreign affiliates causes an increase of 2.45 percent in the price index of tradables and an increase in the overall price index of 5.7 percent.
“Multinational Production and Intra-firm Trade”, with Ayhab Saad, (updated version coming soon).
Intra-flows of goods from U.S multinational parents to their cross-border network of affiliates account for 20 percent of U.S. exports. In spite of the fact that intra-firm trade flows are large as a fraction of total trade; they represent only a small fraction of affiliate sales for the median multinational firm regardless of the destination country or the industry of operation (Ramondo et al., 2012). To account for the extensive margin of intra-firm trade flows, we develop a model of heterogeneous firms, in which parent firms can optimally chose to produce and export intermediate inputs to their affiliates abroad or instead let their affiliates to produce these inputs in the host market. Unlike previous approaches, our model matches the distribution of intra-firm trade patterns observed in the data: the least productive affiliates do not import at all from their parent firm, while only the most productive ones engage in intra-firm trade. Using this framework, we evaluate the impact of idiosyncratic firm's specific shocks on aggregate outcomes, in an economy where production and trade--both intra-firm and arms' length--is concentrated among a small number of large multinational corporations.
“The Employment Effects of Multinational Corporations”, with Nicholas Bloom, Kyle Handley, Sui-Jade Ho and Brian Lucking, (draft coming soon).
This paper studies the employment effects of multinational corporations in the U.S..This project details the dynamics of employment across firms, industries, and regions using a novel combination of international corporate ownership data matched to extremely detailed Census micro data spanning firms, workers and trade-transactions.
