Working Paper: NBER ID: w27873
Authors: Jan Bena; Serdar Dinc; Isil Erel
Abstract: We study how non-financial multinational companies propagate economic declines from their subsidiaries located in countries experiencing an economic downturn to subsidiaries in countries not experiencing one. We find that investment is 18% lower in subsidiaries of these parents relative to the same-industry, same-country subsidiaries of parents that are headquartered in the same parent country but do not have a subsidiary in a country experiencing an economic downturn. The employment growth rate in the affected subsidiaries is zero or negative while it is 1.4% in the subsidiaries of unaffected parents. The aggregate industry-level sales and employment are also negatively impacted in the countries of the affected subsidiaries.
Keywords: No keywords provided
JEL Codes: F23; G01; G31
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Economic downturn (F44) | Investment reduction in subsidiaries (G32) |
| Economic downturn (F44) | Employment growth rate in subsidiaries (F29) |
| Economic downturn (F44) | Aggregate industry-level sales and employment (E10) |