Foreign Ownership and the Extensive Margins of Exports: Evidence for Manufacturing Enterprises in Germany

Authors


  • We thank an anonymous referee for helpful suggestions. All computations were done at the Research Data Centre of the German Statistical Office. We thank Rafael Beier and Christopher Gürke for preparing the data, running the Stata do-files and checking the results for any violation of privacy. The enterprise level data used are confidential but not exclusive; see http://www.forschungsdatenzentrum.de/nutzungsbedingungen.asp for any details regarding the access to the data. To facilitate replication the Stata do-files are available from the second author on request.

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 per cent more goods to up to 31 per cent more countries.

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