Multinational firms׳ entry and productivity: Some aggregate implications of firm-level heterogeneity

Silvio Contessi

    Research output: Contribution to journal › Article › Research › peer-review

    3 Citations (Scopus)

    Abstract

    Despite the microeconomic evidence supporting the superior idiosyncratic productivity of multinational firms (MNFs) and their affiliates, cross-country studies fail to find robust evidence of a positive relationship between foreign direct investment and growth. In order to study the aggregate implications of MNFs entry and production, I develop a dynamic general equilibrium model with firm heterogeneity where MNFs sort according to their own productivity. The entry and production of MNFs contribute to aggregate productivity growth at decreasing rates and affect domestic producers through general equilibrium effects in the labor market. I argue that the heterogeneous composition of the population of affiliates can help explain the conflicting evidence on the impact of foreign direct investment on growth.
    Original languageEnglish
    Pages (from-to)61-80
    Number of pages20
    JournalJournal of Economic Dynamics and Control
    Volume61
    DOIs
    Publication statusPublished - Dec 2015

    Keywords

    • Multinational production
    • Heterogeneous firms
    • Technology transfer
    • Entry
    • Growth

    Cite this

    Contessi, Silvio. / Multinational firms׳ entry and productivity: Some aggregate implications of firm-level heterogeneity. In: Journal of Economic Dynamics and Control. 2015 ; Vol. 61. pp. 61-80.
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    abstract = "Despite the microeconomic evidence supporting the superior idiosyncratic productivity of multinational firms (MNFs) and their affiliates, cross-country studies fail to find robust evidence of a positive relationship between foreign direct investment and growth. In order to study the aggregate implications of MNFs entry and production, I develop a dynamic general equilibrium model with firm heterogeneity where MNFs sort according to their own productivity. The entry and production of MNFs contribute to aggregate productivity growth at decreasing rates and affect domestic producers through general equilibrium effects in the labor market. I argue that the heterogeneous composition of the population of affiliates can help explain the conflicting evidence on the impact of foreign direct investment on growth.",
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    Contessi, S 2015, 'Multinational firms׳ entry and productivity: Some aggregate implications of firm-level heterogeneity', Journal of Economic Dynamics and Control, vol. 61, pp. 61-80. https://doi.org/10.1016/j.jedc.2015.09.002

    Multinational firms׳ entry and productivity: Some aggregate implications of firm-level heterogeneity. / Contessi, Silvio.

    In: Journal of Economic Dynamics and Control, Vol. 61, 12.2015, p. 61-80.

    Research output: Contribution to journal › Article › Research › peer-review

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    AU - Contessi, Silvio

    PY - 2015/12

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    N2 - Despite the microeconomic evidence supporting the superior idiosyncratic productivity of multinational firms (MNFs) and their affiliates, cross-country studies fail to find robust evidence of a positive relationship between foreign direct investment and growth. In order to study the aggregate implications of MNFs entry and production, I develop a dynamic general equilibrium model with firm heterogeneity where MNFs sort according to their own productivity. The entry and production of MNFs contribute to aggregate productivity growth at decreasing rates and affect domestic producers through general equilibrium effects in the labor market. I argue that the heterogeneous composition of the population of affiliates can help explain the conflicting evidence on the impact of foreign direct investment on growth.

    AB - Despite the microeconomic evidence supporting the superior idiosyncratic productivity of multinational firms (MNFs) and their affiliates, cross-country studies fail to find robust evidence of a positive relationship between foreign direct investment and growth. In order to study the aggregate implications of MNFs entry and production, I develop a dynamic general equilibrium model with firm heterogeneity where MNFs sort according to their own productivity. The entry and production of MNFs contribute to aggregate productivity growth at decreasing rates and affect domestic producers through general equilibrium effects in the labor market. I argue that the heterogeneous composition of the population of affiliates can help explain the conflicting evidence on the impact of foreign direct investment on growth.

    KW - Multinational production

    KW - Heterogeneous firms

    KW - Technology transfer

    KW - Entry

    KW - Growth

    U2 - 10.1016/j.jedc.2015.09.002

    DO - 10.1016/j.jedc.2015.09.002

    M3 - Article

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    JO - Journal of Economic Dynamics and Control

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    Contessi S. Multinational firms׳ entry and productivity: Some aggregate implications of firm-level heterogeneity. Journal of Economic Dynamics and Control. 2015 Dec;61:61-80. https://doi.org/10.1016/j.jedc.2015.09.002

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