Foreign Affiliate Sales Data

Eddy Bekkers, Erwin Corong, Csilla Lakatos, Indre Macskasi, Jeanne Metivier, Steen Wettstein and Wen Jin Yuan

No 333241, Conference papers from Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project

Abstract: This paper describes the approach to produce a complete and reconciled global dataset of foreign affiliate sales which can be merged with the existing GTAP database and can thus be used in computable general equilibrium (CGE) models extended with affiliate sales, building on the approach in Fukui and Lakatos (2012). To construct the affiliate sales dataset we proceed in five steps. First, foreign affiliate sales data are collected from Eurostat, OECD, and national sources. Second, three-dimensional affiliate sales data (by host country, home country and by sector) are used to estimate a gravity equation (with Poisson Pseudo Maximum Likelihood, PPML) to be able to generate values for home-host-sector pair combinations for which reported data are missing. The final specification is selected based on out-of-sample performance of various specifications. Third, the estimated affiliate sales data are reconciled with reported data at higher levels of aggregation, using quadratic optimization techniques. Preference is generally given to the activities reported by and within a country's territory (inward flow) when available, because of the overall better quality of those figures. Fourth and optional, we use insights from the literature on phantom-FDI and tax evasion to correct the existing statistics on affiliate sales. Fifth, and finally we integrate the affiliate sales data in the GTAP database, adjusting the affiliate sales data for possible inconsistencies with gross output in the GTAP database. Two baselines are produced: (1) the 2014 baseline, compatible with the GTAP version 10 database, and (2) the 2017 baseline, compatible with the GTAP version 11 database.

Keywords: International; Relations/Trade (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:ags:pugtwp:333241

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