Regional Integration and the (Re)Distrubtion of Foreign Direct Investment between Asymmetric Hosts
AbstractWe analyze the impact of economic integration on the activities of multinational enterprises in a general equilibrium model with asymmetric countries. Foreign direct investment (FDI) inflows are likely only to the extent that multinationals have not already shifted production to the integrating region. Integration could lead to industry rationalization that reduces FDI if tariffjumping is prevalent before liberalization. We find a magnification effect of the level of external protection on both multinational entry and exit. Low-protection countries will have greater MNE entry than high-protection countries due to wage differences.
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Bibliographic InfoPaper provided by DEGIT, Dynamics, Economic Growth, and International Trade in its series DEGIT Conference Papers with number c013_002.
Length: 24 pages
Date of creation: Nov 2008
Date of revision:
multinational enterprise; foreign direct investment; economic integration; preferential trade agreements;
Find related papers by JEL classification:
- F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
- F15 - International Economics - - Trade - - - Economic Integration
- F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
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