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Working Paper
The Micro and Macro Dynamics of Capital Flows
We study empirically and theoretically the effects of international financial flows on resource allocation. Using the universe of firms in Hungary, we show that removing capital controls lowers firms’ cost of capital and increases household consumption, with the latter playing a dominant role. The consumption channel leads to reallocation of resources toward high expenditure elasticity activities—such as services—promoting both the expansion of incumbents and firm entry. A multi-sector heterogeneous firm model replicates these dynamics. Our model shows that non-homotheticity in ...
Working Paper
Multinationals and Structural Transformation
We study how multinational corporations (MNCs) shape firm-level and aggregate structural transformation. Using confidential microdata from Japan and exploiting a quasi-exogenous reform that expanded foreign investment opportunities in China, we assess empirically how this reform affected employment at firms in both the host country (China) and the home country (Japan). In liberalized industries, Japanese manufacturing affiliates in China expanded employment, while parent firms in Japan shifted out of manufacturing and into higher-value service activities, including R&D. To assess the broader ...