Vertical Production Networks in Multinational Firms

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

No 9723, NBER Working Papers from National Bureau of Economic Research, Inc

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 taxes. These results contrast with many findings in previous research.

JEL-codes: F1 F2 (search for similar items in EconPapers)
Date: 2003-05
Note: ITI
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (52)

Published as Gordon H. Hanson & Raymond J. Mataloni & Matthew J. Slaughter, 2005. "Vertical Production Networks in Multinational Firms," The Review of Economics and Statistics, MIT Press, vol. 87(4), pages 664-678, November.

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Journal Article: Vertical Production Networks in Multinational Firms (2005)
Working Paper: Vertical Production Networks in Multinational Firms (2003)
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