Vertical Multinationals and Host-Country Characteristics
AbstractThe literature on multinationals and developing countries has examined the causality" running from direct investment to changes in country characteristics (wages skills, etc.) and also the opposite direction of causality, from existing country characteristics to" inward direct investment. This paper contributes to the second line of research the question of what country characteristics, particularly market size and labor-force" composition, attract inward investment. This approach is motivated by the empirical" observation that the poorest countries attract a far smaller share of world direct investment than" their share of income. Small markets receive less investment per capita than larger ones. We" develop a model that generates both stylized facts in equilibrium, suggesting the existence of a" development trap for small, skilled-labor-scarce countries.
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Date of creation: Sep 1997
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Other versions of this item:
- Zhang, Kevin Honglin & Markusen, James R., 1999. "Vertical multinationals and host-country characteristics," Journal of Development Economics, Elsevier, vol. 59(2), pages 233-252, August.
- F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies
- F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
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