 Multinational production, technology diffusion, and economic growthSheng Cai and Wei Xiang Journal of International Economics, 2025, vol. 157, issue C Abstract: We develop a tractable growth model to study the dynamic macroeconomic effects of multinational production (MP) across countries. In this framework, MP serves as the channel of international idea diffusion: when firms operate in a foreign country, they contribute to the local stock of knowledge. By embedding this mechanism into a quantitative model of trade and MP, we characterize the evolution of bilateral MP flows, trade flows, and technology dynamics across 54 economies. Counterfactual analysis reveals that reduction in MP costs boosted economic growth, especially in developing economies. We show that a 10-year MP sanction on Russia would reduce the welfare by 9.11%, although the immediate effect is small. We find that increasing outward MP costs for U.S. firms has immediate positive wage effects but negative growth implications. Additionally, a 10% increase in U.S. inward trade costs results in a 0.2% decline in the country’s present value of welfare. Keywords: Multinational production; Technology diffusion; International trade; Economic growth (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:inecon:v:157:y:2025:i:c:s0022199625000947 DOI: 10.1016/j.jinteco.2025.104137 Access Statistics for this article Journal of International Economics is currently edited by Gourinchas, Pierre-Olivier and RodrÃguez-Clare, Andrés More articles in Journal of International Economics from Elsevier |
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