Working Paper: NBER ID: w27915
Authors: Vanessa I. Alviarez; Javier Cravino; Natalia Ramondo
Abstract: We measure the contribution of firm-embedded productivity to cross-country income differences. By firm-embedded productivity we refer to the components of productivity that differ across firms and that can be transferred internationally, such as blueprints, management practices, and intangible capital. Our approach relies on microlevel data on the cross-border operations of multinational enterprises (MNEs). We compare the market shares of the exact same MNE in different countries and document that they are about four times larger in developing than in high-income countries. This finding indicates that MNEs face less competition in less-developed countries, suggesting that firm-embedded productivity in those countries is scarce. We propose and implement a new measure of firm-embedded productivity based on this observation. We find a strong positive correlation between our measure and output per-worker across countries. In our sample, differences in firm-embedded productivity account for roughly a third of the cross-country variance in output per-worker.
Keywords: productivity; cross-country income differences; multinational enterprises
JEL Codes: F00
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| MNEs have larger market shares in developing countries (F23) | firm-embedded productivity is relatively scarce in less developed countries (O49) |
| MNEs face less competition in developing countries (F23) | MNEs have larger market shares in developing countries (F23) |
| differences in firm-embedded productivity (L23) | cross-country variance in output per worker (O47) |
| MNEs have larger market shares (F23) | output per worker across countries (O57) |
| market share variations across affiliates of the same MNE (F23) | differences in aggregate firm-embedded productivity (O49) |