(Not So) Easy Come, (Still) Easy Go? Footloose Multinationals Revisited

29 Pages Posted: 11 May 2016

See all articles by Pierre Blanchard

Pierre Blanchard

University Paris-Est Créteil (UPEC)

Emmanuel Dhyne

National Bank of Belgium

Catherine Fuss

National Bank of Belgium

Claude Mathieu

University Paris-Est Créteil (UPEC)

Date Written: May 2016

Abstract

The central question of this paper is to test whether multinational firms (MNFs) are more likely to exit the local market than domestic firms. Using firm‐level data for Belgium, we estimate a random effects probit model taking into account the endogeneity of firm size, total factor productivity (TFP) and sunk costs in firm exit. Our results highlight two features of the ‘footloose’ nature of MNFs. First, controlling for firm and sector characteristics, the exit probability of MNFs is larger than that of domestic firms. Second, MNFs have a lower sensitivity to TFP and size than do domestic firms. This means that an improvement in economic performance on the local market will not prevent a multinational from closing its local plant as much as it would for a domestic firm.

Suggested Citation

Blanchard, Pierre and Dhyne, Emmanuel and Fuss, Catherine and Mathieu, Claude, (Not So) Easy Come, (Still) Easy Go? Footloose Multinationals Revisited (May 2016). The World Economy, Vol. 39, Issue 5, pp. 679-707, 2016. Available at SSRN: https://ssrn.com/abstract=2778352 or http://dx.doi.org/10.1111/twec.12301

Pierre Blanchard (Contact Author)

University Paris-Est Créteil (UPEC) ( email )

Emmanuel Dhyne

National Bank of Belgium ( email )

Brussels, B-1000
Belgium

Catherine Fuss

National Bank of Belgium ( email )

Brussels, B-1000
Belgium

Claude Mathieu

University Paris-Est Créteil (UPEC) ( email )

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