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Globalization of the World Economy: What Happened in 1985?

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  • Jörn Kleinert

Abstract

This paper brings forward a three-country model to analyze the internationalization process in the age of globalization. It is shown that investment of one company increases not only the incentive to invest in another country for every national competitor but for third countryÂ’s companies as well. That results from the adjustment of the host countryÂ’s companies which react to their shrinking market share by reducing output and raising the price of their goods. Some host countryÂ’s companies exit the market. The results are used to explain the surge of foreign direct investment since the mid-1980s.

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Bibliographic Info

Paper provided by Kiel Institute for the World Economy in its series Kiel Working Papers with number 969.

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Length: 38 pages
Date of creation: Mar 2000
Date of revision:
Handle: RePEc:kie:kieliw:969

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  1. Robert Feenstra, 2003. "Integration Of Trade And Disintegration Of Production In The Global Economy," Working Papers, University of California, Davis, Department of Economics 986, University of California, Davis, Department of Economics.
  2. 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.
  3. Markusen, James R. & Venables, Anthony J., 1998. "Multinational firms and the new trade theory," Journal of International Economics, Elsevier, Elsevier, vol. 46(2), pages 183-203, December.
  4. Jose Campa & Linda S. Goldberg, 1997. "The Evolving External Orientation of Manufacturing Industries: Evidence from Four Countries," NBER Working Papers 5919, National Bureau of Economic Research, Inc.
  5. Fujita, Masahisa & Krugman, Paul & Mori, Tomoya, 1999. "On the evolution of hierarchical urban systems1," European Economic Review, Elsevier, Elsevier, vol. 43(2), pages 209-251, February.
  6. McCallum, John, 1995. "National Borders Matter: Canada-U.S. Regional Trade Patterns," American Economic Review, American Economic Association, American Economic Association, vol. 85(3), pages 615-23, June.
  7. Kleinert, Jörn, 1998. "The emergence of multinational enterprises: Simulation results," Kiel Working Papers 900, Kiel Institute for the World Economy.
  8. Volker Nitsch, 2000. "National borders and international trade: evidence from the European Union," Canadian Journal of Economics, Canadian Economics Association, Canadian Economics Association, vol. 33(4), pages 1091-1105, November.
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