Multinational Production and Global Shock Propagation during the Great Recession

87 Pages Posted: 10 Apr 2023 Last revised: 21 Mar 2024

See all articles by Haishi Li

Haishi Li

The University of Hong Kong

Multiple version iconThere are 2 versions of this paper

Date Written: April 15, 2021


I investigate multinational production (MP) patterns during the Great Recession and their impact on trade and shock transmissions across countries. Addressing the "Multinationals' Resilience Puzzle" -- which questions why multinational enterprise (MNE) sales were more resilient than domestic counterparts in an average country yet MP's share in global GDP decreased -- I find that larger countries faced greater MP declines and high MP intensity countries saw larger GDP drops. These patterns can be explained by adverse MNE productivity shocks in major economies that propagated to their MNEs elsewhere and reduced GDP in MP intensive countries. To quantify the spillover effects, I develop a model of MP, sectoral linkages, and global value chains. The model shows that, considering MNEs' involvement in trade, supply-side productivity shocks contributed almost as much to world total trade decline as demand shocks. MNE shocks had a more significant impact on cross-country trade variations compared to demand shocks. MP linkages amplified productivity shocks from key headquarters countries on global MP, trade, and welfare, highlighting the importance of productivity shocks and their propagation through MNEs in understanding the "Multinationals' Resilience Puzzle'".

Keywords: Multinational production; international trade; Great Recession; shock propagation

JEL Classification: F23; F62

Suggested Citation

Li, Haishi, Multinational Production and Global Shock Propagation during the Great Recession (April 15, 2021). Available at SSRN: or

Haishi Li (Contact Author)

The University of Hong Kong ( email )

Pokfulam Road
Hong Kong, Pokfulam HK

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Abstract Views
PlumX Metrics