In this paper we examine how multinational …rms with varied levels of total factor productivity (TFP) self-select into di¤erent host countries. Using a dataset that records the subsidiaries of French manufacturing multinationals, we …nd that …rm-level TFP plays an important role in explaining the sorting of French …rms across host countries. Both the aggregate-and …rm-level estimates suggest that more productive French …rms are consistently more likely than their less e¢ cient domestic competitors to invest in relatively tough host countries. In particular, countries with a smaller market potential, higher …xed costs of investment or lower import tari¤s tend to have higher cuto¤ productivities and attract a greater proportion of productive multinationals. This self-selection mechanism remains largely robust when we control for unobserved …rm and country heterogeneity and address the potential endogeneity of TFP.

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The recent proliferation of free trade agreements (FTAs) has resulted in an increasingly complex network of preferential trading relationships. The economics literature has generally examined the formation of FTAs as a function of the participating countries' economic characteristics alone. In this paper, we show both theoretically and empirically that the decision to enter into an FTA is also crucially dependent on the participating countries' existing FTA relationships with third countries. Accounting for the interdependence of FTAs helps to explain a signi…cant fraction of FTA formations that would not otherwise be predicted by countries'economic characteristics.

We examine the differential response of establishments to the recent global financial crisis with particular emphasis on the role of foreign ownership. Using a worldwide establishment panel dataset, we investigate how multinational subsidiaries around the world responded to the crisis relative to local establishments. We find that, first, multinational subsidiaries fared on average better than local counterfactuals with similar economic characteristics. Second, among multinational subsidiaries, establishments sharing stronger vertical production and financial linkages with parents exhibited greater resilience. Finally, in contrast to the crisis period, the effect of foreign ownership and linkages on establishment performance was insignificant in non-crisis years.JEL codes: F2, F1

We examine the differential response of establishments to the recent global financial crisis with particular emphasis on the role of foreign ownership. Using a worldwide establishment panel dataset, we investigate how multinational subsidiaries around the world responded to the crisis relative to local establishments. We find that, first, multinational subsidiaries fared on average better than local counterfactuals with similar economic characteristics. Second, among multinational subsidiaries, establishments sharing stronger vertical production and financial linkages with parents exhibited greater resilience. Finally, in contrast to the crisis period, the effect of foreign ownership and linkages on establishment performance was insignificant in non-crisis years.JEL codes: F2, F1