Abstract
The share of world trade attributed to intra-firm trade is large and fast-growing. This paper offers new information on the welfare outcome of these trends. Two-country evaluations of the gains from international trade were replaced by local welfare measured, not only by the usual per capita income, but also by a newly available index of happiness which incorporates measures for non-economic human welfare. With the aid of large panel data and Hicksian production theory tools, we estimated positive marginal elasticities and a positive elasticity of substitution between intra-firm trade in goods and services. Kernel causality defined in a new R package helped quantify positive externalities from a selected set of 24 variables related to local welfare. Hence, we conclude that multinationals make a positive impact on local welfare.
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