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Title: | Firm Strategies in a Modern Global Economy: FDI Diversion, Scalable Intangibles, and Export Complexity |
Authors: | Xue, Sifan |
Advisors: | Oberfield, Ezra |
Contributors: | Economics Department |
Keywords: | FDI Diversion Goods Complexity Intangible Scalability International Trade |
Subjects: | Economics |
Issue Date: | 2024 |
Publisher: | Princeton, NJ : Princeton University |
Abstract: | I develop novel economic models and provide new empirical evidence on various aspects of firm strategies in today's global economic environment. Chapter 1 shows that taking into account the existence and patterns of foreign direct investment (FDI) diversion would significantly change the quantitative implications of trade policies, as exemplified by the Trump tariffs. I provide evidence of FDI diversion: countries more exposed to trade diversion from the Trump tariffs have relative higher inward FDI stocks following the China-US trade war, and the elasticities of FDI diversion are highly heterogeneous. I build a multi-country general equilibrium model incorporating FDI diversion with heterogeneous elasticities and apply it to evaluate the impact of the Trump tariffs. The analysis highlights how FDI diversion leads to significantly different aggregate and distributional welfare implications, both in terms of scale and mechanisms. Additionally, FDI diversion creates more incentives for countries to implement tariffs. Finally, accounting for the heterogeneous bilateral FDI elasticities is important to fully understand the patterns of FDI diversion and the quantitative effects of the Trump tariffs. Chapter 2 studies firms’ investments in intangibles and how the investment patterns vary with firm size. My coauthors and I show that among US public firms, larger firms tend to acquire intangibles more through merger and acquisition (M&A) rather than in-house investments (R&D and Organizational capital). We propose that the scalability of intangibles, is a potential explanation for these investment patterns. The firm production technology in our model features scalability of intangibles and the substitutability between production inputs. We derive testable hypotheses regarding firms’ spending shares over acquiring and building intangibles, and physical capital, as well as how the unit price of intangibles varies with the size of an M&A transaction. We test these hypotheses using data on US public firms from Compustat and M&A deal information from Refinitiv’s M&A Standard. Chapter 3 constructs a measure of goods complexity based on how many inputs are involved in production and uses it to study the evolution of export complexity at the firm-level for China and another 11 developing economies. For China, my coauthor and I show that across-sector and across-firm reallocation account for a large part of the aggregate increase of export complexity; larger firms contribute to the aggregate export complexity by operating in more complex sectors, instead of exporting more in each sector; and firms who export more complex goods grow faster in terms of their export values, are more likely to survive, and increase their number of export goods and sectors more. These results suggest that the ability of larger firms to expand into complex sectors is important for driving country aggregate export complexity. In comparison, large firms in most other developing countries are much weaker in this regard. |
URI: | http://arks.princeton.edu/ark:/88435/dsp018g84mq653 |
Type of Material: | Academic dissertations (Ph.D.) |
Language: | en |
Appears in Collections: | Economics |
Files in This Item:
File | Description | Size | Format | |
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Xue_princeton_0181D_15139.pdf | 4.71 MB | Adobe PDF | View/Download |
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