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Pitfalls in Private and Social Incentives of Vertical Cross‐border Integration and Disintegration

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  • Gianpaolo Rossini

Abstract

Production increasingly takes place on a cross‐border basis along two patterns. Either a vertically integrated (VI) multinational firm (MNF) spreads the production sequence over many countries or vertically disintegrated (VD) firms operate independently in distinct stages and countries. On the private side, the decrease of transport costs expands VD, due to incentives alternatively in the upstream (U) and the downstream (D) sections of production. With VD the benefits are disseminated over many countries. With VI they are skewed towards a single area. Then, some countries prefer cross‐border VD. In an international duopoly setting, with vertical restraints due to competition or trade policies, VD becomes the privately preferred mode and provides further ground for the wave of international fragmentation.

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  • Gianpaolo Rossini, 2007. "Pitfalls in Private and Social Incentives of Vertical Cross‐border Integration and Disintegration," Review of International Economics, Wiley Blackwell, vol. 15(5), pages 932-947, November.
    • Handle: RePEc:bla:reviec:v:15:y:2007:i:5:p:932-947
    DOI: 10.1111/j.1467-9396.2007.00680.x
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    References listed on IDEAS

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    Cited by:

    1. G. Rossini, 2017. "Hidden and non measurable trade policies: the case of state controlled firms," Working Papers wp1093, Dipartimento Scienze Economiche, Universita' di Bologna.
    2. Gianpaolo Rossini, 2019. "State Owned Enterprises (SOEs) and Non Transparent Trade Policies," Italian Economic Journal: A Continuation of Rivista Italiana degli Economisti and Giornale degli Economisti, Springer;Società Italiana degli Economisti (Italian Economic Association), vol. 5(3), pages 433-453, October.
    3. Wang, Leonard F.S. & Lee, Jen-yao, 2014. "Ranking the optimum tariff and the maximum revenue tariff in vertically related markets," Research in Economics, Elsevier, vol. 68(3), pages 222-229.

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