Trade liberalization in a multinational-dominated industry: a theoretical and applied general equilibrium analysis
AbstractA theoretical model is developed and applied to the North American auto industry, motivated by the possibility of US-Mexico free trade. Special features of the model include (1) significant scale economies at the plant level, (2) imperfect competition among firms, (3) joint ownership of plants and production coordination across plants by each firm, (4) an (initial) ability of firms to segment markets, (5) a separate treatment of non-resident firms in determining oligopolistic markups. Using an applied GE model, we find that (A) the gains to Mexico are significant and the effects on the US and Canada are essentially zero following North American free trade if firms can continue to segment markets: (B) Because of the way that the North American multinationals determine markups, increased imports from Mexico do not result in a rationalization of US and Canadian production in the way it should if firms were strictly national. (C) Genuinely free trade for consumers (integrated markets) results in large gains for Mexico as the Mexican industry is forced to rationalize, while losses to the US and Canada are very small.
Download InfoTo our knowledge, this item is not available for download. To find whether it is available, there are three options:
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.
Bibliographic InfoArticle provided by Federal Reserve Bank of Dallas in its journal Proceedings.
Volume (Year): (1991)
Issue (Month): ()
Other versions of this item:
- Linda Hunter & James R. Markusen & Thomas F. Rutherford, 1991. "Trade Liberalization in a Multinational-Dominated Industry: A Theoretical and Applied General-Equilibrium Analysis," NBER Working Papers 3679, National Bureau of Economic Research, Inc.
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.:
- Drusilla Brown, 1989.
"Market structure, the exchange rate, and pricing behavior by firms: Some evidence from computable general equilibrium trade models,"
Review of World Economics (Weltwirtschaftliches Archiv),
Springer, vol. 125(3), pages 441-463, September.
- Brown, D.K., 1989. "Market Structure, The Exchange Rate, And Pricing Behavior By Firms: Some Evidence From Computable General Equilibrium Trade Model," Working Papers 251, Research Seminar in International Economics, University of Michigan.
- repec:fth:michin:251 is not listed on IDEAS
- Randall Wigle, 1988. "General Equilibrium Evaluation of Canada-U.S. Trade Liberalization in a Global Context," Canadian Journal of Economics, Canadian Economics Association, vol. 21(3), pages 539-64, August.
- Venables, Anthony J., 1985. "Trade and trade policy with imperfect competition: The case of identical products and free entry," Journal of International Economics, Elsevier, vol. 19(1-2), pages 1-19, August.
- Markusen, James R., 1984. "Multinationals, multi-plant economies, and the gains from trade," Journal of International Economics, Elsevier, vol. 16(3-4), pages 205-226, May.
- Markusen, James R. & Venables, Anthony J., 1988.
"Trade policy with increasing returns and imperfect competition : Contradictory results from competing assumptions,"
Journal of International Economics,
Elsevier, vol. 24(3-4), pages 299-316, May.
- Markusen, James R. & Venables, Anthony J., 1986. "Trade Policy with Increasing Returns and Imperfect Competition: Contradictory Results from Competing Assumptions," CEPR Discussion Papers 120, C.E.P.R. Discussion Papers.
- Venables, Anthony J., 1988.
"International Capacity Choice and National Market Games,"
CEPR Discussion Papers
277, C.E.P.R. Discussion Papers.
- Venables, Anthony J., 1990. "International capacity choice and national market games," Journal of International Economics, Elsevier, vol. 29(1-2), pages 23-42, August.
- Markusen, James R & Wigle, Randall M, 1989. "Nash Equilibrium Tariffs for the United States and Canada: The Roles of Country Size, Scale Economies, and Capital Mobility," Journal of Political Economy, University of Chicago Press, vol. 97(2), pages 368-86, April.
- Harris, Richard, 1984.
"Applied General Equilibrium Analysis of Small Open Economies with Scale Economies and Imperfect Competition,"
American Economic Review,
American Economic Association, vol. 74(5), pages 1016-32, December.
- Richard Harris, 1983. "Applied General Equilibrium Analysis of Small Open Economies with Scale Economies and Imperfect Competition," Working Papers 524, Queen's University, Department of Economics.
- Smith, Alasdair & Venables, Anthony J., 1988.
"Completing the Internal Market in the European Community: Some Industry Simulations,"
CEPR Discussion Papers
233, C.E.P.R. Discussion Papers.
- Smith, Alasdair & Venables, Anthony J., 1988. "Completing the internal market in the European Community : Some industry simulations," European Economic Review, Elsevier, vol. 32(7), pages 1501-1525, September.
- Venables, Anthony J., 1990. "The economic integration of oligopolistic markets," European Economic Review, Elsevier, vol. 34(4), pages 753-769, June.
- Steven Berry & Vittorio Grilli & F. Lopez-de-Silanes, 1992. "The Automobile Industry and The Mexico-Us Free Trade Agreement," NBER Working Papers 4152, National Bureau of Economic Research, Inc.
- Francois, Joseph & Nelson, Doug R, 1998.
"A geometry of Specialization,"
CEPR Discussion Papers
1813, C.E.P.R. Discussion Papers.
- J. David Richardson, 1993. ""New" Trade Theory and Policy a Decade Old: Assessment in a Pacific Context," NBER Working Papers 4042, National Bureau of Economic Research, Inc.
- Jean Mercenier, 1994.
"Nonuniqueness of solutions in applied general equilibrium models with scale economies and imperfect competition,"
183, Federal Reserve Bank of Minneapolis.
- Mercenier, Jean, 1995. "Nonuniqueness of Solutions in Applied General Equilibrium Models with Scale Economies and Imperfect Competition," Economic Theory, Springer, vol. 6(1), pages 161-77, June.
- Johannes Bröcker & Martin Schneider, 2002.
"How Does Economic Development in Eastern Europe Affect Austria's Regions? A Multiregional General Equilibrium Framework,"
Journal of Regional Science,
Wiley Blackwell, vol. 42(2), pages 257-285.
- Bröcker, Johannes & Schneider, Martin, 1999. "How does economic development in eastern Europe affect Austria's regions? A multiregional general equilibrium framework," Discussion Papers 1/99, Dresden University of Technology, Faculty of Transportation and Traffic Sciences "Friedrich List", Institute for Transport and Economics.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Delia Rodriguez).
If references are entirely missing, you can add them using this form.