Working Papers


Information Frictions, Investment Promotion and Multinational Production: Firm-Level Evidence

(with Jerónimo Carballo and Christian Volpe Martincus)

Revise and Resubmit at Journal of International Economics.

Countries make use of a wide range of policies to attract multinational firms but identifying the effect of such policies is difficult. Combining firm-level data on both the location of these firms’ foreign affiliates and detailed service-specific information from Costa Rica’s investment promotion agency (IPA) over time, we find that IPA support significantly increases the probability that a multinational firm establishes its first affiliate in the country but has generally no impact on the expansion of its presence thereafter. We then show that this effect is primarily driven by the resolution of information asymmetries. It is stronger for IPA information services and on multinational firms from countries and in sectors facing more severe information frictions.

CESIFO Working Paper 9043.

Previously circulated as IDB Working Paper 1106.


Work in Progress


[1] Linkages with Multinationals: The Effects on Domestic Firms’ Exports 

(with Jerónimo Carballo, Gianmarco Ottaviano and Christian Volpe Martincus)

In this paper, we examine whether and how linking up with multinational firms results in improved export performance for domestic firms, using a unique dataset that includes data on firm-to-firm purchases and sales both within and across countries. Our estimation results indicate that selling to a multinational firm is associated with a significant increase in the probability that a domestic firm starts to export, especially to a country where the respective multinational firm is headquartered or has an affiliate. This estimated effect is larger when the multinational firms themselves sell abroad and when the linkage intensity is higher.

Draft available upon request. Working Paper coming soon!

[2] Domestic Linkages and the Indirect Effect of Exporting: Evidence from Trade Promotion Policy

(with Jerónimo Carballo and Christian Volpe Martincus)

In this paper, we show that firms that become exporters favor an expansion of their local suppliers in terms of sales, number of employees, and sales per employee. We use a unique dataset that combines data on domestic firm-to-firm transactions and firm-level characteristics, exports, and trade promotion assistance status. To accurately identify these indirect effects, we exploit the fact that trade promotion support is associated with a significant increase in the probability that a domestic firm starts exporting but can be considered otherwise unrelated to suppliers’ performance.

Draft available upon request.