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Emily Blanchard, Tuck School of Business Print
Tuesday, 27 March 2012, 14:00 - 15:15

Emily Blanchard, Tuck School of Business at Dartmouth


U.S. Multinationals and Preferential Market Access


Abstract: This paper examines the relationship between U.S. multinational affiliates and the structure of preferential tariff access to the United States. Combining firm level panel data on U.S. foreign affiliate activity from the U.S. Bureau of Economic Analysis (BEA) with detailed measures of implemented U.S. trade preferences from the U.S. International Trade Commission (USITC), we create a three-way panel spanning 80 industries, 184 countries, and ten years (1997-2006). Consistent with existing theory, we find that off-shoring multinational activity and preferential market access are pos- itively and consistently correlated, both in the pooled sample and within countries, industries, and years. Using instrumental variables to account for the endogeneity of export oriented foreign investment, we find that each $1 billion in U.S. foreign affiliate exports to the U.S. from a particular industry and country is associated with roughly a 4 to 5 percentage point increase in the rate of preferential duty free access. Restricting attention to the Generalized System of Preferences (GSP), the dollar-for-dollar influ- ence of multinational affiliate sales on preferential market access declines by roughly a third for the overall sample, but rises by more than an order of magnitude when we restrict attention to potentially GSP eligible developing countries.

Location: R42.2.113
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