Factor Prices and Factor Substitution in U.S. Firms' Manufacturing Affiliates Abroad

32 Pages Posted: 7 May 2004 Last revised: 15 Jul 2010

See all articles by Maria Borga

Maria Borga

U.S. Bureau of Economic Analysis

Robert E. Lipsey

National Bureau of Economic Research (NBER) at New York (Deceased)

Date Written: April 2004

Abstract

Using confidential individual firm data from the Bureau of Economic Analysis survey of U.S. firms' manufacturing operations abroad, we investigate the determinants of capital intensity in affiliate operations. Host country labor cost, the scale of host country production, and the capital intensity of the parent firm's production in the United States, are all significant influences. The parent's capital intensity is the strongest and most consistent determinant of affiliate capital intensity. Affiliates that export are more sensitive to these factors in their choice of factor proportions than affiliates that sell only in their host countries.

Suggested Citation

Borga, Maria and Lipsey, Robert E., Factor Prices and Factor Substitution in U.S. Firms' Manufacturing Affiliates Abroad (April 2004). NBER Working Paper No. w10442. Available at SSRN: https://ssrn.com/abstract=533001

Maria Borga

U.S. Bureau of Economic Analysis ( email )

1441 L. Street, NW
Washington, DC 20910
United States

Robert E. Lipsey (Contact Author)

National Bureau of Economic Research (NBER) at New York (Deceased)

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