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Factor Prices and Factor Substitution in U.S. Firms' Manufacturing Affiliates Abroad

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  • Maria Borga
  • Robert E. Lipsey

Abstract

Using confidential individual firm data from the Bureau of Economic Analysis survey of U.S. firms' manufacturing operations abroad, we investigate the determinants of capital intensity in affiliate operations. Host country labor cost, the scale of host country production, and the capital intensity of the parent firm's production in the United States, are all significant influences. The parent's capital intensity is the strongest and most consistent determinant of affiliate capital intensity. Affiliates that export are more sensitive to these factors in their choice of factor proportions than affiliates that sell only in their host countries.

Suggested Citation

  • Maria Borga & Robert E. Lipsey, 2004. "Factor Prices and Factor Substitution in U.S. Firms' Manufacturing Affiliates Abroad," NBER Working Papers 10442, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:10442
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    4. Robert E. Lipsey & Irving Kravis, 1982. "Do Multinational Firms Adapt Factor Proportions to Relative Factor Prices?," NBER Chapters, in: Trade and Employment in Developing Countries, Volume 2: Factor Supply and Substitution, pages 215-256, National Bureau of Economic Research, Inc.
    5. Maria Borga & William J. Zeile, 2004. "International Fragmentation of Production and the Intrafirm Trade of U.s. Multinational Companies," BEA Papers 0035, Bureau of Economic Analysis.
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    Cited by:

    1. Raymond Mataloni, Jr., 2011. "The Productivity Advantage and Global Scope of U.S. Multinational Firms," Working Papers 11-23, Center for Economic Studies, U.S. Census Bureau.

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    More about this item

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand

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