Why are Multinationals ‘Footloose’?

Conclusions The ‘footloose’ effect of MNE ownership is attributable to the nature of the plants they close. Multinationals are more likely to close plants that are weakest relative to the firm. There is a high degree of similarity between the plants closed by multiplant firms regardless of whether they are MNE or not. However, MNEs offshore high wage plants while domestic multiplant firms outsource production. The average productivity of exiting MNE plants is higher than industry average productivity When plants are comparably unprofitable relative to the firm but productive relative to the industry, the welfare improving properties of the Melitz (2003) model may weaken or disappear.