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Intra-industry foreign direct investment

Alfaro, Laura and Charlton, Andrew (2009) Intra-industry foreign direct investment. American Economic Review, 99 (5). pp. 2096-2119. ISSN 0002-8282

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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.

Item Type: Article
Official URL:
Additional Information: © 2009 American Economic Association
Library of Congress subject classification: H Social Sciences > HG Finance
Sets: Research centres and groups > Centre for Economic Performance (CEP)
Identification Number: UT ISI:000272977300017
Date Deposited: 13 Mar 2010 18:49

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