Trade and multinational firms: Evidence from China.

摘要

I begin with an examination of how productivity affects the organizational choices of multinational firms. Grossman and Helpman's theories of outsourcing assume factory owners exercise control over inputs. Thus, the coexistence of international buyers and processing factories exercising control over imported inputs in China present a puzzle. To think about this question, I combine insights from Grossman and Helpman's (2004) model with a treatment of heterogeneous firms' input control decision. Conclusions from this model are supported by econometric evidence from Chinese outsourcing arrangements which show that the choice of firm organization is influenced by firm productivity characteristic. Namely, firms with low productivity favor outsourcing, leaving control over imported inputs to processing factories. Firms with intermediate productivity prefer FDI, and firms with high productivity choose outsourcing which retains control of input purchases.; I also explore how multinationals' activities influence export transactions of local traders. To do this, I study Chinese trade between 1997-2003 to see how the presence of multinational firms affected the quality, frequency and survival of new export transactions by private Chinese traders. By exploiting a dataset with fine geographic and product detail, I show how own-industry multinational firm's presence helped to stimulate new trade, and to elevate the quality of those trades. In contrast, I find that greater concentrations of other-industry multinational activity were associated with more frequent export introduction, and longer survival, other-industry exposure is also correlated with lower-valued export introductions.; Finally, I study how differences in tax rates between home and host countries affect multinationals' income shifting behavior. In examining how foreign invested firms' pricing strategies respond to tax incentives, I find evidence consistent with transfer pricing, as export prices of foreign invested firms are positively associated with foreign tax rates, and import prices are negatively associated with foreign tax rates. This chapter provides the first evidence that preferential tax policies toward foreign invested firms generate additional income shifting incentives. Moreover, transfer pricing behavior is more evident for newly traded products and more differentiated commodities, which suggests that to avoid tax examination, multinational firms are more likely to manipulate prices for products whose comparability is more difficult to establish.