Scandinavian Working Papers in Economics

Working Paper Series in Economics and Institutions of Innovation,
Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies

No 317: Foreign Ownership and the Extensive Margins of Exports: Evidence for Manufacturing Enterprises in Germany

Horst Raff () and Joachim Wagner ()
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Horst Raff: Christian-Albrechts-University of Kiel, Kiel Institute for the World Economy and CESifo
Joachim Wagner: Leuphana University Lueneburg, CESIS, Royal Institute of Technology, Stockholm

Abstract: We examine how foreign ownership of a firm affects the variety of goods that the firm exports and the number of countries it trades with. We construct a simple theoretical model of how foreign ownership may affect these extensive margins of exports and take this model to data from Germany, one of the leading actors on the world market for goods. In line with theoretical predictions we find that foreign-owned firms do export more goods to more countries after controlling for firm size, productivity and industry affiliation. These differences between foreign-owned firms and domestically controlled firms are highly statistically significant, and they are large from an economic point of view, with foreign-owned firms exporting up to 39% more goods to up to 31% more countries.

Keywords: International trade; foreign ownership; multinational enterprise; foreign direct investment; extensive margins of exports; Germany

JEL-codes: F14; F23

24 pages, June 12, 2013

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