Accounting for the growth of MNC-based trade using a structural model of U.S. MNCs

By S. Feinberg, Michael P. Keane. 2006

174 citations recorded by the source corpus.

In recent decades, U.S. foreign trade grew much faster than GDP, but there is no consensus why. Notably lacking is an understanding of the role of multinational corporations (MNCs), which mediate over half of world trade. We use Bureau of Economic Analysis data on U.S. MNCs to study the rapid growth of MNC-based trade from 1983 to 1996. Using a model of U.S. MNCs and Canadian affiliates, we decompose this growth by source. Tariff reductions can largely explain increases in arms-length MNC-based trade. But intra-firm trade growth is attributed mostly to ?technical change.? We present additional evidence suggesting just-in-time production facilitated intra-firm trade. (JEL F13, F14, F23)

Subfields: Economics and Econometrics, Strategy and Management

View Paper: https://www.semanticscholar.org/paper/1b8bea5a7266695105aa3e7cb7c4a5a7eb335e7a

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Citations in the corpus

Foreign direct investment and firm performance: an empirical analysis of Italian firms (2016, unknown): “This last result is in line with the evidence in the study by Gandhi et al. (2012) that analyzes the productivity gap between exporters and non-exporters.”
Margins of Multinational Labor Substitution (2006, background): “This general selection condition encompasses motives for both horizontal and vertical FDI, which may overlap in practice (Feinberg and Keane 2006).”
Trade, FDI, and the Organization of Firms (2006, background): “Feinberg Keane (2003) find, for example, that among U.S. multinationals with affiliates in Canada only 12 percent are of the purely horizontal flows of intermediate inputs) and only percent are of the purely vertical type (i. they have negligible intrafirm flows intermediate inputs in one direction…”
Internalization advantage and subsidiary performance: The role of business group affiliation and host country characteristics (2019, unknown): “Such inter-subsidiary trade offers internalization advantage by avoiding external market failure and leveraging the low-cost location advantages (Feinberg & Keane, 2006; Buckley & Casson, 1976).”
Intrafirm trade and vertical fragmentation in U.S. multinational corporations (2015, unknown): “2 Working at the afﬁliate level, for example, Borga and Zeile (2004), Hanson et al. (2005), Feinberg and Keane (2006), and Bilir et al. (2013) analyze the country-and industry-level determinants of intra-MNC trade.”
Gains from Trade When Firms Matter (2012, background): “Also, Feinberg and Keane (2006, 2009) find that the 1983–1996 increase in trade between U.S. multinationals and their Canadian affiliates was driven largely by improved logistics management, such as adoption of just-in-time production techniques.”
Improved Access to Foreign Markets Raises Plant-level Productivity…For Some Plants (2010, unknown): “Feinberg and Keane (2006) and Keane and Feinberg (forthcoming) find that the 1983-96 increase in trade between U.S. multinationals and their Canadian affiliates was driven by technology adoption (the adoption of just-in-time techniques).”
Global Production with Export Platforms (2016, unknown): “Exceptions are Feinberg and Keane (2006) who structurally estimate U.S. multinationals’ decisions to invest and produce in Canada, and Rodrigue (2010) who structurally estimates a model of trade and FDI with data on Indonesian manufacturing plants.”