Author Abstract
Multinationals exhibit distinct agglomeration patterns, which have transformed the global landscape of industrial production (Alfaro and Chen, 2014). Using a unique worldwide plant-level dataset that reports detailed location, ownership, and operation information for plants in over 100 countries, we construct a spatially continuous index of pairwise-industry agglomeration and investigate the patterns and determinants underlying the global economic geography of multinational firms. In particular, we run a horserace between two distinct economic forces: location fundamentals and agglomeration economies. We find that location fundamentals including market access and comparative advantage and agglomeration economies including capital-good market externality and technology diffusion play a particularly important role in multinationals' economic geography. These findings remain robust when we use alternative measures of trade costs, address potential reverse causality, and explore regional patterns.
Paper Information
- Full Working Paper Text
- Working Paper Publication Date: August 2016
- HBS Working Paper Number: HBS Working Paper #17-014
- Faculty Unit(s): Business, Government and International Economy
