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Multinationals and the Gains from International Diversification

Author

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  • Rowland, P.F.
  • Tesar, L.L.

Abstract

This paper focuses on the impact of technological progress (modeled as learning by doing) on economic growth when one of the inputs in production is an open access renewable resource. Technological progress is found to indi- rectly induce resource depletion, such that sustainable growth will not occur in autarky under certain preferences, and is possible in trade only if the resource sector contracts over time or shuts down completely. Comparisons of steady state welfare in autarky and free trade reveal that for very high or low world prices of the resource-based good, it is possible for the economy to gain from trade. However if the price is intermediate, it will instead lose.

Suggested Citation

  • Rowland, P.F. & Tesar, L.L., 1998. "Multinationals and the Gains from International Diversification," Working Papers 425, Research Seminar in International Economics, University of Michigan.
    • Handle: RePEc:mie:wpaper:425
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    References listed on IDEAS

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    1. Tesar, Linda L. & Werner, Ingrid M., 1995. "Home bias and high turnover," Journal of International Money and Finance, Elsevier, vol. 14(4), pages 467-492, August.
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    More about this item

    Keywords

    TRADE POLICY ; TRANSNATIONAL CORPORATIONS;

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

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