UC Irvine

This dissertation includes three essays. The first essay studies the question of whether multinationals that use inputs that are child labor intensive tend to outsource their production rather than producing them in-house. In the media, a commonly cited determinant of a multinational’s decision to engage in outsourcing vs. FDI is child labor. If multinationals are in an industry, and sourcing from a country, where child labor is common, there is an incentive to purchase at arms-length rather than producing in-house. This is because the negative publicity that comes with sourcing child labor is much greater when the child labor is found to be in-house rather than from an arm’s length firm. I test for this hypothesis and find a negative relationship between the share of imports that are intra-firm and the child labor intensity of the industry. I also show that the relationship is stronger when the goods are from poorer countries, countries that use more child labor, and in years when public opinion and the media is more focused on the problem of child labor.

The second essay studies the effect of uncertainty on firm level investment using time series data on shipping and stock prices from the English East India Company. The English East India Company was one of the world’s first multinational corporations and it faced substantial political and economic risks for much of its history. Its business required large investments to send trading voyages to Asia and sustain an organizational structure in Asia. Using a discrete time duration model I find that higher levels of uncertainty, measured by stock return volatility, decrease the probability of sending trading voyages. In addition, I examine potential heterogeneous effects and I find that uncertainty has larger effects during the sailing season

The third essay, coauthored with Gary Richardson and Michael Gou, studies the relationship between bank failures and business failures between 1900 and 1933. During the Federal Reserve’s formative years, banks failed frequently, and corporate bankruptcies followed. We employ new identification strategies that demonstrate a causal link between bank failures and business activity and illuminate the mechanism underlying that link. Our analysis indicates that bank failures triggered bankruptcies of firms that depended upon banks for ongoing access to commercial credit.