Intra-industry Foreign Direct Investment

Laura Alfaro and Andrew Charlton

American Economic Review, 2009, vol. 99, issue 5, 2096-2119

Abstract: We use a new firm-level dataset that establishes the location, ownership, and activity of 650,000 multinational subsidiaries. Using a combination of four-digit-level information and input-output tables, we find the share of vertical FDI (subsidiaries that provide inputs to their parent firms) to be larger than commonly thought, even within developed countries. Most subsidiaries are not readily explained by the comparative advantage considerations whereby multinationals locate activities abroad to take advantage of factor cost differences. Instead, multinationals tend to own the stages of production proximate to their final production, giving rise to a class of high-skill, intra-industry vertical FDI. (JEL G11, J32)

JEL-codes: F23 L22 L23 R32 (search for similar items in EconPapers)
Date: 2009
Note: DOI: 10.1257/aer.99.5.2096
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Citations: View citations in EconPapers (202)

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Related works:
Working Paper: Intra-Industry Foreign Direct Investment (2007)
Working Paper: Intra-industry foreign direct investment (2007)
Working Paper: Intra-Industry Foreign Direct Investment (2007)
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