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Trade, Foreign direct investment, and multinational enterprises in a general equilibrium model

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  • Koop, Michael J.
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    Abstract

    Trade, foreign direct investment and the existence of multinational enterprises are often analyzed in separate model, which are frequently based on mutually exclusive assumptions. The paper integrates several features of international economic exchange into one general equilibrium model. This model explains various types of trade (interindustry, intraindustry, intrafirm), foreign direct investment (one-way, cross-hauling of FDI), and the existence of multinational enterprises (vertically as well as horizontally integrated ones). With the market structure being endogeneous, different production, trade and investment patterns can occur. In order to assess the influence of country asymmetries (relative and absolute factor endowment differences) and transport costs on production patterns as well as trade and investment flows, simulation techniques are applied to various specifications of the model.

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    File URL: http://econstor.eu/bitstream/10419/46685/1/258074507.pdf
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    Bibliographic Info

    Paper provided by Kiel Institute for the World Economy in its series Kiel Working Papers with number 833.

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    Date of creation: 1997
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    Handle: RePEc:kie:kieliw:833

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    1. S. Lael Brainard, 1993. "An Empirical Assessment of the Factor Proportions Explanation of Multi-National Sales," NBER Working Papers 4583, National Bureau of Economic Research, Inc.
    2. Markusen, James R., 1983. "Factor movements and commodity trade as complements," Journal of International Economics, Elsevier, vol. 14(3-4), pages 341-356, May.
    3. James R. Markusen & Anthony J. Venables, 1995. "Multinational Firms and The New Trade Theory," NBER Working Papers 5036, National Bureau of Economic Research, Inc.
    4. Friedman, James, 1993. "Oligopoly theory," Handbook of Mathematical Economics, in: K. J. Arrow & M.D. Intriligator (ed.), Handbook of Mathematical Economics, edition 4, volume 2, chapter 11, pages 491-534 Elsevier.
    5. James Brander, 1980. "Intra-Industry Trade in Identical Commodities," Working Papers 380, Queen's University, Department of Economics.
    6. Ethier, Wilfred J, 1986. "The Multinational Firm," The Quarterly Journal of Economics, MIT Press, vol. 101(4), pages 805-33, November.
    7. Ignatius Horstmann & James R. Markusen, 1987. "Licensing versus Direct Investment: A Model of Internalization by the Multinational Enterprise," Canadian Journal of Economics, Canadian Economics Association, vol. 20(3), pages 464-81, August.
    8. James R. Markusen & Anthony J. Venables, 1996. "The Theory of Endowment, Intra-Industry, and Multinational Trade," NBER Working Papers 5529, National Bureau of Economic Research, Inc.
    9. James R. Markusen & Anthony J. Venables & Denise Eby Konan & Kevin H. Zhang, 1996. "A Unified Treatment of Horizontal Direct Investment, Vertical Direct Investment, and the Pattern of Trade in Goods and Services," NBER Working Papers 5696, National Bureau of Economic Research, Inc.
    10. S. Lael Brainard, 1993. "A Simple Theory of Multinational Corporations and Trade with a Trade-Off Between Proximity and Concentration," NBER Working Papers 4269, National Bureau of Economic Research, Inc.
    11. Rugman, Alan M, 1986. "New Theories of the Multinational Enterprise: An Assessment of Internalization Theory," Bulletin of Economic Research, Wiley Blackwell, vol. 38(2), pages 101-18, May.
    12. S. Lael Brainard, 1993. "An Empirical Assessment of the Proximity-Concentration Tradeoff between Multinational Sales and Trade," NBER Working Papers 4580, National Bureau of Economic Research, Inc.
    13. Ignatius J. Horstmann & James R. Markusen, 1990. "Endogenous Market Structures in International Trade," NBER Working Papers 3283, National Bureau of Economic Research, Inc.
    14. Wong, Kar-yiu, 1986. "Are international trade and factor mobility substitutes?," Journal of International Economics, Elsevier, vol. 21(1-2), pages 25-43, August.
    15. Markusen, James R., 1984. "Multinationals, multi-plant economies, and the gains from trade," Journal of International Economics, Elsevier, vol. 16(3-4), pages 205-226, May.
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