When multinationals leave: A CGE analysis of the impact of divestments
AbstractMost studies on Multinational Enterprises (MNEs) focus on the impact of their expansion through inward or outward foreign direct investment (FDI) flows. However, divestments are quite common among the operations of MNEs. In order to derive their effects, we build a computable general equilibrium (CGE) model that includes two non-standard characteristics: the presence of MNEs and unemployment. The model is applied to the Spanish economy, where FDI inflows have surpassed divestments at the aggregate level in the period 2005-2009, although divestments have been sizeable in ten sectors. We analyse two different scenarios: 1) divestments that involve the closure of plants of foreign affiliates and 2) divestments where national firms buy the plant of foreign affiliates. The model allows estimating the overall impact of the divestments occurring simultaneously in ten sectors and in particular sectors. Results not only show that national acquisitions are less harmful than closures, but quantify those effects, and provide information on the role of the divesting sector. Some adjustment costs arise in all scenarios. --
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Bibliographic InfoArticle provided by Kiel Institute for the World Economy in its journal Economics: The Open-Access, Open-Assessment E-Journal.
Volume (Year): 8 (2014)
Issue (Month): 6 ()
FDI; disinvestments; closures; national acquisitions; Spain;
Other versions of this item:
- Gómez Plana, Antonio G. & Latorre, María C., 2013. "When multinationals leave: A CGE analysis of the impact of divestments," Economics Discussion Papers 2013-45, Kiel Institute for the World Economy.
- C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
- F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
- F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
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