Working Paper: NBER ID: w10442
Authors: Maria Borga; Robert E. Lipsey
Abstract: Using confidential individual firm data from the Bureau of Economic Analysis survey of U.S. firms' manufacturing operations abroad, we investigate the determinants of capital intensity in affiliate operations. Host country labor cost, the scale of host country production, and the capital intensity of the parent firm's production in the United States, are all significant influences. The parent's capital intensity is the strongest and most consistent determinant of affiliate capital intensity. Affiliates that export are more sensitive to these factors in their choice of factor proportions than affiliates that sell only in their host countries.
Keywords: capital intensity; multinational firms; labor costs; production scale
JEL Codes: F23; J23
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| wage levels in host countries (F16) | capital intensity of production (D24) |
| capital intensity of parent firms (G32) | capital intensity of affiliates (G31) |
| parent capital intensity (G31) | responsiveness of exporting affiliates to labor costs (F16) |
| labor costs (J30) | responsiveness of exporting affiliates to changes in capital intensity (F20) |