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Trade and Location with Horizontal and Vertical Multi-region Firms

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Author Info
Ekholm, Karolina
Forslid, Rikard

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Abstract

We analyse the effect on agglomeration tendencies of allowing multi-region firms in a standard trade and location model, the core-periphery (CP) model developed by Kurgman (1991). The introduction of horizontal multi-region firms mitigates the agglomeration effects found in the CP model by reducing the range of trade costs for which the core-periphery equilibrium occurs. The introduction of vertical multi-region firms that separate the location of headquarters and plants has two counteracting effects. While headquarters exhibit a strong tendency to concentrate, plants tend to spread out. The equilibrium is always asymmetric in spite of the underlying symmetry of the model. Copyright 2001 by The editors of the Scandinavian Journal of Economics.

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Article provided by Blackwell Publishing in its journal Scandinavian Journal of Economics.

Volume (Year): 103 (2001)
Issue (Month): 1 (March)
Pages: 101-18
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Handle: RePEc:bla:scandj:v:103:y:2001:i:1:p:101-18

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  1. Horstmann, Ignatius J. & Markusen, James R., 1992. "Endogenous market structures in international trade (natura facit saltum)," Journal of International Economics, Elsevier, vol. 32(1-2), pages 109-129, February. [Downloadable!] (restricted)
  2. S. Lael Brainard, 1993. "A Simple Theory of Multinational Corporations and Trade with a Trade-Off Between Proximity and Concentration," NBER Working Papers 4269, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  3. Markusen, James R. & Venables, Anthony J., 1996. "The Theory of Endowment, Intra-Industry and Multinational Trade," CEPR Discussion Papers 1341, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  4. Krugman, Paul R & Venables, Anthony J, 1995. "Globalization and the Inequality of Nations," The Quarterly Journal of Economics, MIT Press, vol. 110(4), pages 857-80, November. [Downloadable!] (restricted)
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  5. Ignatius J. Horstmann & James R. Markusen, 1990. "Endogenous Market Structures in International Trade," NBER Working Papers 3283, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  6. Masahisa Fujita & Paul Krugman & Anthony J. Venables, 2001. "The Spatial Economy: Cities, Regions, and International Trade," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262561476.
  7. Krugman, Paul, 1991. "Increasing Returns and Economic Geography," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 483-99, June. [Downloadable!] (restricted)
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  8. Markusen, James R. & Venables, Anthony J., 1998. "Multinational firms and the new trade theory," Journal of International Economics, Elsevier, vol. 46(2), pages 183-203, December. [Downloadable!] (restricted)
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  9. Helpman, Elhanan, 1984. "A Simple Theory of International Trade with Multinational Corporations," Journal of Political Economy, University of Chicago Press, vol. 92(3), pages 451-71, June. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. K Behrens & P M Picard, 2005. "Welfare, home market effects, and horizontal foreign direct investment," The School of Economics Discussion Paper Series 0519, Economics, The University of Manchester. [Downloadable!]
    Other versions:
  2. Becker, Sascha O. & Ekholm, Karolina & Jäckle, Robert & Mündler, Marc-Andreas, 2005. "Location choice and employment decisions : a comparison of German and Swedish multinationals," Discussion Paper Series 1: Economic Studies 2005,08, Deutsche Bundesbank, Research Centre. [Downloadable!]
    Other versions:
  3. Harry Garretsen & Jolanda Peeters, 2007. "FDI and the Relevance of Spatial Linkages: do third country effects matter for Dutch FDI?," DNB Working Papers 162, Netherlands Central Bank, Research Department. [Downloadable!]
  4. Rodrigo Alegria, 2006. "Countries, Regions and Multinational Firms: Location Determinants in the European Union," ERSA conference papers ersa06p143, European Regional Science Association. [Downloadable!]
  5. Garretsen, Harry / Peeters, Jolanda, 2008. "FDI and the Relevance of Spatial Linkages: Do third Country Effects Matter for Dutch FDI?," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
  6. Strauss-Kahn, Vanessa & Vives, Xavier, 2006. "Why and where do headquarters move?," IESE Research Papers D/650, IESE Business School.
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  7. Peter Egger & Stefan Gruber & Mario Larch & Michael Pfaffermayr, 2005. "Knowledge-Capital Meets New Economic Geography," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
    Other versions:
  8. Ekholm, Karolina & Hakkala, Katariina, 2004. "Location of R&D and High-Tech Production by Vertically Integrated Multinationals," Working Paper Series 616, Research Institute of Industrial Economics. [Downloadable!]
    Other versions:
  9. Kenmei Tsubota, 2009. "Location and organization choice of firms," KIER Working Papers 679, Kyoto University, Institute of Economic Research. [Downloadable!]
  10. Harry Garretsen & Jolanda Peeters, 2009. "FDI and the relevance of spatial linkages: do third-country effects matter for Dutch FDI?," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 145(2), pages 319-338, July. [Downloadable!] (restricted)
  11. James R. Markusen & Keith E. Maskus, 2001. "General-Equilibrium Approaches to the Multinational Firm: A Review of Theory and Evidence," NBER Working Papers 8334, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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