Vertical Production Networks in Multinational Firms

Gordon Hanson, Mataloni, Jr., Raymond J. and Matthew J. Slaughter

No 331164, Conference papers from Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project

Abstract: In recent decades, growth of overall world trade has been driven in large part by the rapid growth of trade in intermediate inputs. Much of this input trade involves multinational firms locating input processing in their foreign affiliates, thereby creating global vertical production networks. In this paper, we use firm-level data on U.S. multinationals to examine trade in intermediate inputs for further processing between parent firms and their foreign affiliates. We estimate affiliate demand for imported inputs as a function of host-country and industry trade costs, factor prices, and other variables. Among our main findings are that demand for imported inputs is higher when affiliates face lower trade costs, lower wages for less-skilled labor (both in absolute terms and relative to wages for more-skilled labor), and lower corporate income tax rates. These results contrast with many findings in previous research.

Keywords: International Relations/Trade; Production Economics (search for similar items in EconPapers)
Pages: 42
Date: 2003
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Citations: View citations in EconPapers (32)

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Related works:
Journal Article: Vertical Production Networks in Multinational Firms (2005)
Working Paper: Vertical Production Networks in Multinational Firms (2003)
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Persistent link: https://EconPapers.repec.org/RePEc:ags:pugtwp:331164

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