US multinational affiliate exports from developing countries

Abstract

Globalization of production is one of the dominant issues of the international economy. This paper explores how country characteristics influence the choice of developing country export bases by U.S. multinationals. It separately analyzes two types of exports, exports to the headquarters country and exports to the rest of the world. The main findings are that favorable host country geography has attracted both types of export-oriented foreign direct investment, and liberal policies toward multinationals have attracted affiliates that produce rest-of-world exports. Labor costs and taxes, traditional determinants, also prove important to investment for both types of exports. More fundamentally, this research shows that country characteristics relate to the location of multinational production differently depending on the purpose of the production.