Multinational Production and Innovation in Tandem

Jin Liu

Working Papers from U.S. Census Bureau, Center for Economic Studies

Abstract: Multinational firms colocate production and innovation by offshoring them to the same host country or region. In this paper, I examine the determinants of multinational firms’ production and innovation locations. Exploiting plausibly exogenous variations in tariffs, I find complementarities between production and innovation within host countries and regions. To evaluate manufacturing reshoring policies, I develop a quantitative multicountry offshoring location choice model. I allow for rich colocation benefits and cross-country interdependencies and prove supermodularity of the model to solve this otherwise NP-hard problem. I find the effects of manufacturing reshoring policies are nonlinear, contingent upon firm heterogeneity, and they accumulate dynamically.

Keywords: multinational firms; colocation of production and innovation; offshoring (search for similar items in EconPapers)
JEL-codes: F14 F23 L23 O32 (search for similar items in EconPapers)
Date: 2024-10
New Economics Papers: this item is included in nep-cse, nep-ind, nep-int and nep-sbm
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https://www2.census.gov/library/working-papers/2024/adrm/ces/CES-WP-24-64.pdf First version, 2024 (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:cen:wpaper:24-64

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