Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
962762 | Journal of International Economics | 2010 | 12 Pages |
Abstract
We examine how multinational firms with heterogeneous total factor productivity (TFP) self-select into different host countries. Both aggregate- and firm-level estimates suggest that more productive French firms are more likely than their less efficient competitors to invest in relatively tough host countries. Countries with a smaller market potential, higher fixed costs of investment or lower import tariffs tend to have higher cutoff productivities and attract a greater proportion of productive multinationals. This self-selection mechanism remains largely robust when we control for unobserved firm and country heterogeneity and address potential TFP endogeneity.
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Authors
Maggie Xiaoyang Chen, Michael O. Moore,