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Essays in international trade and investment

Biermann, Marcus (2019) Essays in international trade and investment. PhD thesis, London School of Economics and Political Science.

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The first chapter of the thesis investigates the effect of trade on the size distribution of firms. I collected historical data between 1882 and 1907 from the German Empire to address this question. I can then match three data sets according to the same geographic boundaries: industry census data, railway trade data, and waterway trade data. The key findings are that trade integration impacts the firm size distribution heterogeneously across five size categories. I find evidence of a hierarchical and stark shift in employment and firm share from the smallest toward larger firm size categories. A "Bartik" instrument is proposed to argue that the correlations described are indeed causal. I provide evidence for a fall in transport costs and technology adoption as mechanisms to explain the stylized facts observed in the data. The second chapter studies how management practices as intangible assets are associated with performance of multinational business groups. I show that management practices of parents and affiliates are positively correlated. I use acquisitions as an event-study and find that better managed parents improve productivity in their acquisition targets. In the cross-section, better parent management practices are positively correlated with affiliate size and productivity. The positive correlation between parent management practices and affiliate productivity is strengthened when the affiliate is in the first level of the corporate hierarchy or when the source country is more developed than the destination country in terms of income. The third chapter examines whether multinational firms transmit the effects of a localized banking crisis to countries all over the world. An exogenous shock to the credit supply of multinational parent corporations located in Germany is identified. The shock to parents caused a reduction in the sales of their international affiliates for three years. Unique data on linkages between parents and affiliates are used to study the transmission mechanism from parents' credit supply to affiliates' sales. Both financial and real channels played a role: Parents withdrew equity from their affiliates, reduced intra-firm trade with affiliates, and required more long-term lending from the affiliates. The results improve our understanding of the internal operations of multinational firms and suggest that they contribute to global business cycle synchronization.

Item Type: Thesis (PhD)
Additional Information: © 2019 Marcus Biermann
Library of Congress subject classification: H Social Sciences > HF Commerce
H Social Sciences > HG Finance
Sets: Departments > Economics
Supervisor: Ottaviano, Gianmarco

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