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Chapter 19 The Effect of New Environment on Foreign Direct Investment in an Oligopolistic Heckscher–Ohlin Model

In: Contemporary and Emerging Issues in Trade Theory and Policy

Author

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  • Sajal Lahiri
  • Yoshiyasu Ono

Abstract

We develop a 2×2×2 model of international trade in which one of the sectors is oligopolistic. The oligopolistic sector consists of a given number of a priori identical firms belonging to one of the two countries, but some deciding to locate in the other country so as to realize higher profits. If a firm locates in the foreign country, its technological capability is assumed to go down due to the alien environment. In this framework we examine the effect of the environment on the level of foreign direct investment and on factor prices in the two countries.

Suggested Citation

  • Sajal Lahiri & Yoshiyasu Ono, 2008. "Chapter 19 The Effect of New Environment on Foreign Direct Investment in an Oligopolistic Heckscher–Ohlin Model," Frontiers of Economics and Globalization, in: Contemporary and Emerging Issues in Trade Theory and Policy, pages 367-377, Emerald Group Publishing Limited.
    • Handle: RePEc:eme:fegzzz:s1574-8715(08)04019-0
    DOI: 10.1016/S1574-8715(08)04019-0
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