The Location of Oversea8 Production and

Production for Export by U.S. fultinational Firum The location of overseas manufacturing production by U.S. firmsseems to have been strongly influenced by common factors that operatein all industries: notably proximity to the United States and to other markets. Within industries, the choices made by parent finis among locations appear to show a tendency of "opposites attract,"with low—wage and low—capital—intensity parents choosing high—wage,highcapital_intensjty countries and high—wage, high_capital_intensityparents making the opposite choice. Production for export seems-to have been most strongly attractedby large internal markets in host countries. Economies of scale in production presumably made large markets also economical as exportbases. Another factor was high trade propensities of host countries,which we interpret as representing access to imported materials at lowworld prices or better transport, finance, and other trade facilitie8. Labor cost seems to have been a weak influence on location choices. U.S. firms tended to export from high-wage countries but the high productivity in such countries more than offset the high wages. However, labor cost, to the extent we could measure it, was not in general a major influence on the location of export production