Advanced Search
MyIDEAS: Login to save this article or follow this journal

Trade liberalization in a multinational-dominated industry: a theoretical and applied general equilibrium analysis

Contents:

Author Info

  • Linda Hunter
  • James R. Markusen
  • Thomas F. Rutherford

Abstract

A 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.

(This abstract was borrowed from another version of this item.)

Download Info

To 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 Info

Article provided by Federal Reserve Bank of Dallas in its journal Proceedings.

Volume (Year): (1991)
Issue (Month): ()
Pages: 39-42

as in new window
Handle: RePEc:fip:feddpr:y:1991:p:39-42

Contact details of provider:
Email:
Web page: http://www.dallasfed.org/
More information through EDIRC

Order Information:
Email:

Related research

Keywords: Free trade ; North American Free Trade Agreement ; Automobile industry and trade;

Other versions of this item:

References

References listed on IDEAS
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.:
as in new window
  1. 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.
  2. 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.
  3. 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.
  4. 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.
  5. 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.
  6. repec:fth:michin:251 is not listed on IDEAS
  7. 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.
  8. Venables, Anthony J., 1988. "International Capacity Choice and National Market Games," CEPR Discussion Papers 277, C.E.P.R. Discussion Papers.
  9. Norman, Victor D., 1990. "Assessing trade and welfare effects of trade liberalization : A comparison of alternative approaches to CGE modelling with imperfect competition," European Economic Review, Elsevier, vol. 34(4), pages 725-745, June.
  10. 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.
  11. 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.
  12. Venables, Anthony J., 1990. "The economic integration of oligopolistic markets," European Economic Review, Elsevier, vol. 34(4), pages 753-769, June.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. 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.
  2. 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.
  3. 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.
  4. Francois, Joseph & Nelson, Doug R, 1998. "A geometry of Specialization," CEPR Discussion Papers 1813, C.E.P.R. Discussion Papers.
  5. J. David Richardson, 1992. ""New" Trade Theory and Policy a Decade Old: Assessment in a Pacific Context," NBER Working Papers 4042, National Bureau of Economic Research, Inc.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:fip:feddpr:y:1991:p:39-42. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Delia Rodriguez).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.