Trade Workshop - Glenn Magerman

"Multinational Ownership and Trade Participation" (joint with Paola Conconi, Fabrizio Leone and Catherine Thomas)

Abstract
In this paper, we show that multinational corporations (MNCs) boost affiliates’ trade participation by alleviating country-specific trade frictions in and around the countries in which the MNCs have affiliates. New affiliates of MNCs are more likely to export and import, trade with more countries, and have higher values of exports and imports. We develop a model in which multinational ownership can affect new affiliates’ export and import decisions through different channels. To isolate network-specific channels, we estimate firm-level gravity regressions with three-way fixed effects, exploiting variation in the network structure of the parents. We show that new affiliates are more likely to start exporting to and importing from countries in which their parent operates. This MNC network effect increases with geographical and cultural distance from the affiliates, alleviating standard gravity frictions. We also find evidence of an extended MNC network effect: new affiliates are more likely to start trading with countries that are close (but do not belong) to their parents’ network.

Download paper