We derive gravity equations from three different general equilibrium models incorporating multinational firms. We show that gravity equations are particularly adapted to the analysis of foreign affiliates\' activities of multinational firms. However, the different theoretical models lead to different specifications and interpretations of the empirical results. This is particularly the case considering gravity equations derived from factor proportion models compared to those derived from proximity concentration theories.
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Find related papers by JEL classification: F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
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Braconier, Henrik & Norbäck, Pehr-Johan & Urban, Dieter, 2002.
"Vertical FDI Revisited,"
Working Paper Series
579, Research Institute of Industrial Economics.
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