Publications
Publications
- 2012
Selection, Reallocation, and Knowledge Spillover: Identifying the Sources of Productivity Gains from Multinational Activity
By: Laura Alfaro and Maggie X. Chen
Abstract
The impact of multinational activity on host-country productivity has been a major topic of economic research. A positive impact can be attributed to knowledge spillovers from foreign multinational to domestic firms or a less stressed, alternative explanation—firm selections—whereby competition from multinational firms leads to market reallocations and allows only the most productive domestic firms to survive. We develop a theoretical and structural empirical framework to quantify and decompose the productivity gains from multinational activity and show that even though knowledge spillovers and selections both predict positive gains, the two effects can be disentangled by exploring their distinct predictions on the productivity and the revenue distribution properties of domestic firms. Using a large cross-country panel dataset of manufacturing firms, we find productivity gains from multinational activity are driven by knowledge spillovers in developing nations but selections and market reallocations in developed countries. The analysis also suggests significant evidence of between-industry reallocations in capital and labor markets.
Keywords
Multinational Firms and Management; Performance Productivity; Supply and Industry; Knowledge; Manufacturing Industry
Citation
Alfaro, Laura, and Maggie X. Chen. "Selection, Reallocation, and Knowledge Spillover: Identifying the Sources of Productivity Gains from Multinational Activity." 2012.
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