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Table 5 presents OLS and IV estimates of equation (12), measuring how changes in foreign affiliate employment affect employment at U.S. parent firms. Table 5 reports the first-stage partial F-statistics associated with Wooldridge (2002), procedure 18.1, but the appropriate F-statistics to consider when evaluating weak instruments concerns are those for the affiliate-level first stage in table 4.30 Because we have a strong first-stage relationship between BTTs and foreign affiliate employment only within certain industries, we restrict our sample of parents in table 5 to those in high-RID industries.

Table 5.

U.S. Parent-Level Analysis: The Effect of Offshore Employment on Domestic MNE Employment

Dependent Variable: Log Parent Employment—ln(sft)
(1)(2)(3)(4)(5)(6)
SpecificationOLSOLSIVIVIVIV
SampleAllAllAllAllNew AffCont Aff
log affiliate employment: 0.289*** 0.263*** 0.174*** 0.130*** 0.103 0.139*** 
(lnMit(0.017) (0.017) (0.017) (0.015) (0.116) (0.016) 
ln(GDPus+GDPd)  −0.039  0.006 −0.331 −0.004 
  (0.126)  (0.092) (0.366) (0.088) 
ln(GDPus-GDPd)2  −0.006  −0.007 0.148 −0.001 
  (0.064)  (0.047) (0.189) (0.045) 
ln(SkillDifference)  −0.167***  −0.097** 0.093 −0.118** 
  (0.057)  (0.044) (0.106) (0.047) 
ln(TradeCosts)  0.005  −0.017 0.017 −0.02 
  (0.018)  (0.013) (0.035) (0.014) 
BIT  −0.473*  −0.432** −0.335 −0.460** 
  (0.25)  (0.167) (0.208) (0.201) 
FTA  −0.016  −0.004 0.083 −0.009 
  (0.082)  (0.048) (0.125) (0.053) 
Exchange Rate  −0.000  −0.000 0.000 −0.000 
  (0.000)  (0.000) (0.000) (0.000) 
Parent FE YES YES YES YES YES YES 
Year FE YES YES YES YES YES YES 
N 29,765 29,765 29,765 29,765 6,077 23,688 
R-squared 0.1865 0.2189 0.1406 0.1581 0.3536 0.1663 
First-Stage F-Statistic – – 508.14 413.36 117.5 402.53 
Endogenous Test p-Value – – 0.0017 0.0019 0.0022 0.0015 
Dependent Variable: Log Parent Employment—ln(sft)
(1)(2)(3)(4)(5)(6)
SpecificationOLSOLSIVIVIVIV
SampleAllAllAllAllNew AffCont Aff
log affiliate employment: 0.289*** 0.263*** 0.174*** 0.130*** 0.103 0.139*** 
(lnMit(0.017) (0.017) (0.017) (0.015) (0.116) (0.016) 
ln(GDPus+GDPd)  −0.039  0.006 −0.331 −0.004 
  (0.126)  (0.092) (0.366) (0.088) 
ln(GDPus-GDPd)2  −0.006  −0.007 0.148 −0.001 
  (0.064)  (0.047) (0.189) (0.045) 
ln(SkillDifference)  −0.167***  −0.097** 0.093 −0.118** 
  (0.057)  (0.044) (0.106) (0.047) 
ln(TradeCosts)  0.005  −0.017 0.017 −0.02 
  (0.018)  (0.013) (0.035) (0.014) 
BIT  −0.473*  −0.432** −0.335 −0.460** 
  (0.25)  (0.167) (0.208) (0.201) 
FTA  −0.016  −0.004 0.083 −0.009 
  (0.082)  (0.048) (0.125) (0.053) 
Exchange Rate  −0.000  −0.000 0.000 −0.000 
  (0.000)  (0.000) (0.000) (0.000) 
Parent FE YES YES YES YES YES YES 
Year FE YES YES YES YES YES YES 
N 29,765 29,765 29,765 29,765 6,077 23,688 
R-squared 0.1865 0.2189 0.1406 0.1581 0.3536 0.1663 
First-Stage F-Statistic – – 508.14 413.36 117.5 402.53 
Endogenous Test p-Value – – 0.0017 0.0019 0.0022 0.0015 

Documents the effects of BTT-induced changes in foreign-affiliate employment on domestic employment of multinational firms in industries that exhibit high ratios of royalty, interest, and dividend payments relative to total industry sales. Columns 5 and 6 respectively restrict the sample to parent firms that did and did not open new affiliates in countries newly receiving a BTT. First-stage F-statistics are large for all IV specifications, though the relevant F-statistics for weak-instrument concerns appear in columns 2 and 5 of table 4 (see text for discussion). In all IV specifications, the equality of OLS and IV is rejected. Sample covers 1987–2007. Standard errors clustered by parent firm and year are in parentheses. Significant at *10%, **5%, and ***1%.

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