Affiliating versus Subcontracting: the Case of Multinationals

An aspect of globalization that has attracted increased attention in recent years is intra-firm trade. Actually, an intra-firm trading relationship indicates that an affiliate is present in the partner country. Hence, distinguishing intra- and extra-firm dimensions gives us access to the boundaries of multinationals and consequently to their policies of development. More precisely, the paper aims at determining factors of the trade-off faced by multinationals between affiliating and subcontracting a relocated segment of production or distribution, using microdata on intra- and extra-firm bilateral trade of affiliates located in France. First, a microeconomic model is developed. The idea is to compare the profit made by a multinational if trade occurs within it with that made if trade occurs with another firm. On the one hand internalization may generate additive fixed costs, on the other it may enable the multinational to keep its comparative advantage gained through the development of firm-specific assets. The model is then empirically validated. The advertising intensity and the technological level of production are notably associated with intra-firm trade and thus with internalization. Actually, both brand and quality are shown to be profit accelerators in the event of affiliating. Essential means of product differentiation, these two factors are enough for multinationals to cover the additive fixed costs generated by internalization when the market becomes sufficiently large.boundaries of multinationals, intra-firm trade, product differentiation

The impact of local taxes on plants location decision

Determinants of plant locations are known to be multiple. Locations of partners and competitors are crucial, as well as the territory's local characteristics. Some local characteristics can be natural. Others, like local taxes, reflect local agents' decisions. To what extent are local taxes taken into consideration during the plant location process? We build a Poisson model to explain the number of firm creations observed in a given municipality in a given year. Correlations and first results tend to show that there exists some unobserved attractivity factors correlated with the level of local taxes. To deal with endogeneity, we present an approach close to the Regression Discontinuity Design. Finally, we find that, everything else being equal, higher local taxes actually deter firms from investing in a given zone.local attractivity, local taxes, plant location decisions, regression discontinuity design, Poisson regression, spatial economics

The impact of French Zones Franches Urbaines on employment and business creation

In 2004, 41 Zones Franches Urbaines (ZFU) have replaced less generous Zones de Redynamisation Urbaine (ZRU). ZFUs are particularly generous Enterprise Zones schemes in which establishments are exempted from all taxes and social contributions for 5 years. A first wave of ZFUs was zoned in 1997, followed by a second one in 2004 and a third one in 2006. In spite of the cost of such policies (the net cost of the second-wave ZFUs was around 125 million euros in 2005), the impact has never been assessed by econometricians. In this study, we aim to evaluate the net effect of the ZFU policy on both employment and business creations, using the transformation of less generous ZRUs into ZFUs in 2004. We use micro data on establishments and jobs at an infra-municipal scale. Differences-in-differences as well as standard propensity score matching are used to try to take selection bias into account. We finally identify a significantly positive effect on both business creations and employment. Yet, these effects are weak especially when compared to the magnitude of the costs.local employment, local policies, enterprise zones, evaluation

Offshore Outsourcing and the size of the French Industrial Labor Force

We estimate the amount of job losses in the manufacturing sector in France due to offshore outsourcing. Our estimation is based on exhaustive, micro-level data covering all firms in the manufacturing sector in France from 1995 to 2001. We identify the groups or firms where employment decreases in French units and, at the same time, for which the imports of the good previously produced in France increases. Between 1995 and 2001, 13 500 jobs are lost each year on average in France due to offshore outsourcing in the manufacturing sector. In slightly less than half of the cases, offshore outsourcing is directed towards a low wage country : mainly China, but also North Africa, Eastern Europe, Asia, Brazil. Job losses are more frequent in some sectors, such as clothing, textile, domestic equipment, manufacture of electronic equipments and components. Nonetheless, offshore outsourcing is observed in nearly all sectors.offshore outsourcing, international competition, job loss, industrial organization

What kernel methods bring to the analysis of spatial concentration of migrants in France: 1968-1999

Most studies about the geographical location of a phenomenon or a population first aggregate data according to administrative boundaries which are generally not related to the issue. When the population under study is rare, and when the sample is not exhaustive, these aggregation choices often lead the results. In this study, we use non-parametric kernel techniques to estimate ratios of population densities. Using this kind of method is not technically costly and allows one to obtain the optimal trade-off between variance and bias. We apply this technique to the distribution of immigrants over the French territory, using data form population censures between 1968 to 1999. Another contribution of this work is to propose a concentration index based on the density ratios obtained in the first step.spatial concentration, geographical location, segregation indices, non-parametric estimation, immigration

France's export performances compared to those of its main partners

This paper compares Frances export performances to those of five similar exporting countries (Germany, Spain, the United Kingdom, Italy and Japan). The analysis is decomposed by geographical destination of the exports (44 partner countries) and by sector (12 industrial sectors). Trade flows are characterized in terms of prices and volumes. The data come from the OECD (OECDs STAN database and INSEEs FLUBIL database, constructed with OECD data). The econometric analysis is based on a structural trade model, inspired by the new international trade theory. The model establishes a relationship between relative market shares and a set of explanatory variables, among which relative prices. We identify a few stylised facts regarding the change in Frances market shares, relatively to that of the five other exporting countries considered: - In industrialized markets, the relative market shares are relatively well explained, in the structural model, by the industry-size and price-competitiveness effects. Over the 1992-2003 period, France gained market shares with respect to Japan and the United Kingdom, but lost market shares relatively to the three other exporting countries. However, the size of these trends is limited, except when Frances performances are compared to those of Spain, where catching-up effects are probably predominant. - Ceteris paribus, and in particular price-competitiveness and industry-size, France tends to lose market shares relatively to the five other countries considered between 1992 and 2003, essentially in emerging markets. - Finally, the analysis of the results that are left unexplained by the structural model shows that these changes in relative market shares are mainly of a cyclical nature. This is particularly clear in the case of the comparison between Frances and Germanys export performances.International trade, market shares, exports

The Native Copper- and Zinc- Binding Protein Metallothionein Blocks Copper-Mediated Aβ Aggregation and Toxicity in Rat Cortical Neurons

Background: A major pathological hallmark of AD is the deposition of insoluble extracellular b-amyloid (Ab) plaques. There are compelling data suggesting that Ab aggregation is catalysed by reaction with the metals zinc and copper. Methodology/Principal Findings: We now report that the major human-expressed metallothionein (MT) subtype, MT-2A, is capable of preventing the in vitro copper-mediated aggregation of Ab1–40 and Ab1–42. This action of MT-2A appears to involve a metal-swap between Zn 7MT-2A and Cu(II)-Ab, since neither Cu 10MT-2A or carboxymethylated MT-2A blocked Cu(II)-Ab aggregation. Furthermore, Zn7MT-2A blocked Cu(II)-Ab induced changes in ionic homeostasis and subsequent neurotoxicity of cultured cortical neurons. Conclusions/Significance: These results indicate that MTs of the type represented by MT-2A are capable of protecting against Ab aggregation and toxicity. Given the recent interest in metal-chelation therapies for AD that remove metal from Ab leaving a metal-free Ab that can readily bind metals again, we believe that MT-2A might represent a different therapeuti

Space Division Multiplexing in Optical Fibres

Optical communications technology has made enormous and steady progress for several decades, providing the key resource in our increasingly information-driven society and economy. Much of this progress has been in finding innovative ways to increase the data carrying capacity of a single optical fibre. In this search, researchers have explored (and close to maximally exploited) every available degree of freedom, and even commercial systems now utilize multiplexing in time, wavelength, polarization, and phase to speed more information through the fibre infrastructure. Conspicuously, one potentially enormous source of improvement has however been left untapped in these systems: fibres can easily support hundreds of spatial modes, but today's commercial systems (single-mode or multi-mode) make no attempt to use these as parallel channels for independent signals.Comment: to appear in Nature Photonic