Abstract

http://ssrn.com/abstract=2101302
 
 

References (51)



 
 

Citations (1)



 


 



Market Reallocation and Knowledge Spillover: The Gains from Multinational Production


Laura Alfaro


Harvard University - Business, Government and the International Economy Unit

Maggie Xiaoyang Chen


George Washington University

June 17, 2013

Harvard Business School BGIE Unit Working Paper No. 12-111

Abstract:     
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 emphasized explanation is market reallocation, whereby competition from multinationals leads to factor reallocation and the survival of only the most productive domestic firms. We develop a model that incorporates both aspects and quantify their relative importance in the gains from multinational production by exploring their distinct predictions for domestic distributions of productivity and revenue. We show that knowledge spillover shifts both distributions rightward while market reallocation raises the left truncation of the distributions and shifts revenue leftward. Using a rich firm-level panel dataset that spans 60 countries, we find that both market reallocation and knowledge spillover are significant sources of productivity gain. Ignoring the role of market reallocation can lead to significant bias in understanding the nature of gains from multinational production.

Number of Pages in PDF File: 49

Keywords: Gains from Multinational Production, Market Reallocation, Knowledge Spillover

JEL Classification: F2, O1, O4

working papers series


Download This Paper

Date posted: July 5, 2012 ; Last revised: June 17, 2013

Suggested Citation

Alfaro, Laura and Chen, Maggie Xiaoyang, Market Reallocation and Knowledge Spillover: The Gains from Multinational Production (June 17, 2013). Harvard Business School BGIE Unit Working Paper No. 12-111. Available at SSRN: http://ssrn.com/abstract=2101302 or http://dx.doi.org/10.2139/ssrn.2101302

Contact Information

Laura Alfaro (Contact Author)
Harvard University - Business, Government and the International Economy Unit ( email )
Cambridge, MA 02138
United States
Maggie Xiaoyang Chen
George Washington University ( email )
710 21st Street NW
Washington, DC 20052
United States
Feedback to SSRN


Paper statistics
Abstract Views: 451
Downloads: 127
Download Rank: 124,448
References:  51
Citations:  1

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo2 in 0.422 seconds