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Reconciling the Evidence on the Knowledge-capital Model

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  • Henrik Braconier
  • Pehr-Johan Norbäck
  • Dieter Urban

Abstract

The knowledge-capital model (KC model), described in Markusen (2002 ), encompasses both market size (horizontal) as well as factor endowment (vertical) explanations to why multinational production occurs. Although the KC model seems intuitively appealing the empirical support has, so far, been mixed and even confused. In this study we find strong, robust and consistent support for the KC model. In contrast to previous studies, our empirical specification is directly mapped from theory. We also use an enlarged dataset, where the data coverage is significantly improved. Our results also give estimated surfaces remarkably similar to theoretical simulations of the KC model. In addition, the results give important insights into why previous studies have yielded such diverse results. Copyright Blackwell Publishing Ltd 2005.

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Bibliographic Info

Article provided by Wiley Blackwell in its journal Review of International Economics.

Volume (Year): 13 (2005)
Issue (Month): 4 (09)
Pages: 770-786

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Handle: RePEc:bla:reviec:v:13:y:2005:i:4:p:770-786

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  1. Bruce A. Blonigen & Ronald B. Davies & Keith Head, 2002. "Estimating The Knowledge-Capital Model of the Multinational Enterprise: Comment," University of Oregon Economics Department Working Papers 2002-13, University of Oregon Economics Department, revised 01 Mar 2002.
  2. David Hummels & Dana Rapoport & Kei-Mu Yi, 1998. "Vertical specialization and the changing nature of world trade," Economic Policy Review, Federal Reserve Bank of New York, issue Jun, pages 79-99.
  3. David L. Carr & James R. Markusen & Keith E. Maskus, 1998. "Estimating the Knowledge-Capital Model of the Multinational Enterprise," NBER Working Papers 6773, National Bureau of Economic Research, Inc.
  4. Ronald B. Davies, 2008. "Hunting High and Low for Vertical FDI," Review of International Economics, Wiley Blackwell, vol. 16(2), pages 250-267, 05.
  5. James R. Markusen & Keith E. Maskus, 1999. "Multinational Firms: Reconciling Theory and Evidence," NBER Working Papers 7163, National Bureau of Economic Research, Inc.
  6. Hummels, David & Ishii, Jun & Yi, Kei-Mu, 2001. "The nature and growth of vertical specialization in world trade," Journal of International Economics, Elsevier, vol. 54(1), pages 75-96, June.
  7. Henrik Braconier & Pehr-Johan Norback & Dieter Urban, 2002. "Vertical FDI Reviseted," Development Working Papers 167, Centro Studi Luca d\'Agliano, University of Milano.
  8. Barro, Robert J & Lee, Jong Wha, 1996. "International Measures of Schooling Years and Schooling Quality," American Economic Review, American Economic Association, vol. 86(2), pages 218-23, May.
  9. James R. Markusen, 1997. "Trade versus Investment Liberalization," NBER Working Papers 6231, National Bureau of Economic Research, Inc.
  10. James R. Markusen & Keith E. Maskus, 1999. "Discriminating Among Alternative Theories of the Multinational Enterprise," NBER Working Papers 7164, National Bureau of Economic Research, Inc.
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