5 research outputs found
Optimal Degree of Foreign Ownership under Uncertainty
This paper studies the integration strategies of multinational firms in a multiperiod
model under incomplete contracts and uncertainty. I incorporate continuous
levels of integration to the study of organizational choice in an existing
model of foreign direct investment (Antras and Helpman, 2004) and extend the
model to a multi-period framework of learning. The joint productivity of the two
partners in an integrated firm is unknown initially to both sides and is revealed
only after continued joint production. The model gives rise to a nondegenerate
distribution of foreign ownership at the firm level and shows that the optimal
level of integration rises with the age of the firm. These patterns are supported
by detailed plant-level data on share of foreign ownership. The model predicts
that the degree of foreign ownership is an increasing function of joint productivity
and intra-firm trade should rise over time as a result of increased control by
multinationals. I test the implications of my theory with plant-level data from
Turkey and find support for the predictions of the model.partial ownership, vertical integration, multinationals, uncertainty
Lending Cycles and Real Outcomes: Costs of Political Misalignment. LEQS Paper No. 139/2018 December 2018
We document a strong political cycle in bank credit and industry outcomes in Turkey.
In line with theories of tactical redistribution, state-owned banks systematically adjust
their lending around local elections compared with private banks in the same province
based on electoral competition and political alignment of incumbent mayors. This
effect only exists in corporate lending as opposed to consumer loans. It creates credit
constraints for firms in opposition areas, which suffer drops in employment and sales
but not firm entry. There is substantial misallocation of financial resources as
provinces and industries with high initial efficiency suffer the greatest constraints
Foreign Direct Investment and Wages: Does the Level of Ownership Matter?
This paper examines the relationship between foreign equity participation and
average wages at the plant level. I show that using a binary measure for foreign
ownership, as is the traditional practice in the literature, leads to biased estimates
of the foreign ownership wage premium, compared to the use of a continuous mea-
sure if the true relationship is linear. Using nonparametric and semi-parametric
techniques I find this is the case: the relationship between the level of foreign
ownership and average wages is better approximated as linear rather than binary.
I find that a ten percentage point increase in foreign equity participation is asso-
ciated with an approximately 4% increase in the average wage of non-production
workers. These results are the first to show that the wage premium due to foreign
ownership varies with the level of foreign ownership in a continuous manner.Foreign Direct Investment; Wages; Censoring; Dynamic Panel Data
Elections and economic cycles: what can we learn from the recent Turkish experience?
This chapter studies the presence of political cycles in Turkey’s recent economic history. It first discusses the incentives and the ability of the central government to engage in opportunistic behavior to boost economic activity around local elections. It then describes how the tools available to the government on the fiscal and banking fronts have changed since the 2001 crisis. The chapter documents suggestive evidence that state-owned banks engage in selective lending in the run-up to local elections when compared with private banks. This selective lending seems to favor provinces where the governing party faces greater competition from the opposition. There is less evidence regarding fiscal spending. The chapter discusses the implications of politically motivated policies on financial inclusion and aggregate efficiency
Elections and economic cycles: what can we learn from the recent Turkish experience?
This chapter studies the presence of political cycles in Turkey’s recent economic history. It first discusses the incentives and the ability of the central government to engage in opportunistic behavior to boost economic activity around local elections. It then describes how the tools available to the government on the fiscal and banking fronts have changed since the 2001 crisis. The chapter documents suggestive evidence that state-owned banks engage in selective lending in the run-up to local elections when compared with private banks. This selective lending seems to favor provinces where the governing party faces greater competition from the opposition. There is less evidence regarding fiscal spending. The chapter discusses the implications of politically motivated policies on financial inclusion and aggregate efficiency