| Multinational corporations play an increasingly prominent role in the world economy. Sales of foreign affiliates of multinational corporations now exceed the value of the world trade in goods and services. In this dissertation I contribute to the analysis of firms global investment behavior. I develop a dynamic structural model of a firm's location choice for its production affiliate, and analyze the effect of trade policy on foreign direct investment. I consider both tariff and non-tariff barriers to export, and explicitly model the link between investment decisions and trade policy. The model is then applied using two different datasets.; In Chapter two, I use a panel dataset of Japanese investment in the US manufacturing industries. A reduced form equation is derived from the full dynamic model and estimated. The estimated parameters are used to evaluate the relative importance of the determinants of investment decisions. In Chapter three, I calibrate the full dynamic model from Chapter using a firm-level dataset. This analysis, which is unique to the literature, choice among multiple locations in a dynamic framework. The evidence on micro level determinants of investment decisions.; In Chapter three, I calibrate the full dynamic model from Chapter using a firm-level dataset. This analysis, which is unique to the literature, focuses on the firm's choice among multiple locations in a dynamic framework. The results provide evidence on micro level determinants of investment decisions. |
