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Horizontally-integrated MNE and plant heterogeneity

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Abstract

In the paper we develop a monopolistically competitive general equilibrium model of horizontally-integrated multinational enterprise (MNE) with heterogeneous plants. We demonstrate that smaller productivity differences between domestic and foreign plants increase the level of multinational activity. We also show that the level of multinational activity is the most intensive between countries of the similar size. Finally, we show that the relative wage increases (decreases) with relative productivity of workers and the degree of product differentiation when the home country is smaller (bigger) compared to the foreign country.

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Bibliographic Info

Article provided by National Bank of Poland, Economic Institute in its journal Bank i Kredyt.

Volume (Year): 44 (2013)
Issue (Month): 6 ()
Pages: 605-622

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Handle: RePEc:nbp:nbpbik:v:44:y:2013:i:6:p:605-622

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Keywords: horizontal integration; MNE; plant heterogeneity;

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  1. Lancaster, Kelvin, 1980. "Intra-industry trade under perfect monopolistic competition," Journal of International Economics, Elsevier, vol. 10(2), pages 151-175, May.
  2. Ethier, Wilfred J, 1982. "National and International Returns to Scale in the Modern Theory of International Trade," American Economic Review, American Economic Association, vol. 72(3), pages 389-405, June.
  3. Dixit, Avinash K & Stiglitz, Joseph E, 1977. "Monopolistic Competition and Optimum Product Diversity," American Economic Review, American Economic Association, vol. 67(3), pages 297-308, June.
  4. James Brander, 1980. "Intra-Industry Trade in Identical Commodities," Working Papers 380, Queen's University, Department of Economics.
  5. James Brander & Paul Krugman, 1980. "A "Reciprocal Dumping" Model of International Trade," Working Papers 405, Queen's University, Department of Economics.
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  8. Caves, Richard E, 1971. "International Corporations: The Industrial Economics of Foreign Investment," Economica, London School of Economics and Political Science, vol. 38(149), pages 1-27, February.
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  11. Krugman, Paul, 1980. "Scale Economies, Product Differentiation, and the Pattern of Trade," American Economic Review, American Economic Association, vol. 70(5), pages 950-59, December.
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  13. Melitz, Marc J, 2002. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," CEPR Discussion Papers 3381, C.E.P.R. Discussion Papers.
  14. 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.
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  16. Krugman, Paul, 1990. "Multinational enterprise: The old and the new in history and theory," North American Review of Economics and Finance, Elsevier, vol. 1(2), pages 267-280.
  17. Andrzej Cieslik, 2012. "Multinational Enterprises, Foreign Knowledge Spillovers and Host Country Wages," Equilibrium, Uniwersytet Mikolaja Kopernika, vol. 7, pages 7-20.
  18. Krugman, Paul R, 1981. "Intraindustry Specialization and the Gains from Trade," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 959-73, October.
  19. Horstmann, Ignatius J & Markusen, James R, 1987. "Strategic Investments and the Development of Multinationals," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 28(1), pages 109-21, February.
  20. Andrzej Cieślik, 2008. "Multinational Firms, International Knowledge Flows, and Dual Labor Markets in Developing Economies," Review of Development Economics, Wiley Blackwell, vol. 12(1), pages 160-179, 02.
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