Multinational Production and Innovation in Tandem
December 10, 2024 Jin Liu

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Jin Liu is an IES Postdoctoral Fellow at Princeton University. In July 2025, she will join the University of Pennsylvania as an Assistant Professor of Economics. Her fields are international trade, industrial organization, and firm dynamics, with a special focus on innovation, technology adoption, e-commerce, and industrial policies. She received her Ph.D. in Economics from New York University in 2024.


Website: https://sites.google.com/view/jinliusite/home

Paper: https://drive.google.com/file/d/1MgAVol31S1TmIEiLu2aYwrkRC7Qy12Ic/view




Abstract

Multinational firms colocate production and innovation by offshoring them to the same host country or region. In this paper, I examine the determinants of multinational firms’ production and innovation locations. I find complementarities between production and innovation within host countries and regions, exploiting plausibly exogenous variation in tariffs. To evaluate manufacturing reshoring policies, I develop a quantifiable multicountry offshoring location choice model. I allow for rich colocation benefits and cross-country interdependencies and prove supermodularity of the model to solve this otherwise NP-hard problem. I find the effects of manufacturing reshoring policies are nonlinear, contingent upon firm heterogeneity, and they accumulate dynamically.


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