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Vertical Multinationals and Host-Country Characteristics

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Author Info
Kevin H. Zhang
James R. Markusen

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Abstract

The 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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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 6203.

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Date of creation: Sep 1997
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Publication status: published as Journal of Development Economies, Vol. 59 (1999): 233-252.
Handle: RePEc:nbr:nberwo:6203

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Find related papers by JEL classification:
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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  1. Markusen, James R, 1995. "The Boundaries of Multinational Enterprises and the Theory of International Trade," Journal of Economic Perspectives, American Economic Association, vol. 9(2), pages 169-89, Spring. [Downloadable!] (restricted)
  2. Wang, Jian-Ye & Blomstrom, Magnus, 1992. "Foreign investment and technology transfer : A simple model," European Economic Review, Elsevier, vol. 36(1), pages 137-155, January. [Downloadable!] (restricted)
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  3. 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. [Downloadable!] (restricted)
  4. Markusen, James R & Venables, Anthony J, 1997. "The Role of Multinational Firms in the Wage-Gap Debate," Review of International Economics, Blackwell Publishing, vol. 5(4), pages 435-51, November.
  5. Teece, David J, 1977. "Technology Transfer by Multinational Firms: The Resource Cost of Transferring Technological Know-how," Economic Journal, Royal Economic Society, vol. 87(346), pages 242-61, June. [Downloadable!] (restricted)
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(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Giorgio Barba Navaretti, Anna M. Falzoni, Alessandro Turrini, 2001. "The decision to invest in a low-wage country: Evidence from Italian textiles and clothing multinationals," Journal of International Trade & Economic Development, Taylor and Francis Journals, vol. 10(4), pages 451-470, December. [Downloadable!] (restricted)
    Other versions:
  2. Kai Carstensen & Farid Toubal, 2003. "Foreign Direct Investment in Central and Eastern European Countries: A Dynamic Panel Analysis," Kiel Working Papers 1143, Kiel Institute for the World Economy. [Downloadable!]
    Other versions:
  3. Assaf Razin & Efraim Sadka & Hui Tong, 2005. "Bilateral FDI Flows: Threshold Barriers and Productivity Shocks," NBER Working Papers 11639, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  4. Assaf Razin & Yona Rubinstein & Efraim Sadka, 2004. "Fixed Costs and FDI: The Conflicting Effects of Productivity Shocks," NBER Working Papers 10864, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  5. Markusen, James R. & Strand, Bridget, 2007. "Trade in Business Services in General Equilibrium," CEPR Discussion Papers 6080, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  6. David L. Carr & James R. Markusen & Keith E. Maskus, 2001. "Estimating the Knowledge-Capital Model of the Multinational Enterprise," American Economic Review, American Economic Association, vol. 91(3), pages 693-708, June. [Downloadable!] (restricted)
    Other versions:
  7. Oscar Bajo-Rubio & Carmen López-Pueyo, . "Foreign direct investment in a process of economic integration: The case of Spanish manufacturing, 1986-1992," Studies on the Spanish Economy 126, FEDEA. [Downloadable!]
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  8. Alyson Ma, 2006. "On the choice of in-house production versus outsourcing by multinationals," Journal of International Trade & Economic Development, Taylor and Francis Journals, vol. 15(2), pages 231-254, June. [Downloadable!] (restricted)
  9. Walter Elberfeld & Georg Götz & Frank Stähler, 2005. "Vertical Foreign Direct Investment, Welfare, and Employment," Topics in Economic Analysis & Policy, Berkeley Electronic Press, vol. 5(1), pages 1280-1280. [Downloadable!] (restricted)
    Other versions:
  10. Maria Borga & William J. Zeile, 2004. "International Fragmentation of Production and the Intrafirm Trade of U.S. Multinational Companies," BEA Working Papers 0013, Bureau of Economic Analysis. [Downloadable!]
  11. H. Hammoudi & W. Hatit, 2004. "Firmes Multinationales et Formation de la Main d'oeuvre dans le Pays hôte : le "Tariff -jumping Argument" revisité," Working Papers ERMES 0410, ERMES, University Paris 2. [Downloadable!]
  12. Christer Ljungwall & Martin Linde-Rahr, 2005. "Environmental Policy and the Location of Foreign Direct Investment in China," Macroeconomics Working Papers 681, East Asian Bureau of Economic Research. [Downloadable!]
  13. Holger Görg, 2000. "Fragmentation and trade: US inward processing trade in the EU," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 127(3), pages 403-422, 09. [Downloadable!] (restricted)
  14. Ana Teresa Tavares & Aurora A.C. Teixeira, 2006. "Is Human Capital a Significant Determinant of Portugal’s FDI Attractiveness?," FEP Working Papers 211, Universidade do Porto, Faculdade de Economia do Porto. [Downloadable!]
  15. Carlos A. Cinquetti, 2007. "Technology Service And Factor Intensity: The Export Impact From Multinationals," Anais do XXXV Encontro Nacional de Economia [Proceedings of the 35th Brazilian Economics Meeting] 056, ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of Graduate Programs in Economics]. [Downloadable!]
  16. Jim Markusen, 2004. "Regional Integration and Third-Country Inward Investment," Business and Politics, Berkeley Electronic Press, vol. 6(1), pages 1082-1082. [Downloadable!] (restricted)
  17. Mathä, Thomas, 2000. "Proximity-Concentration versus Factor Proportion Explanation: The Case of Swedish Multinationals in the EU," Working Paper Series in Economics and Finance 416, Stockholm School of Economics, revised 08 Dec 2000. [Downloadable!]
  18. Claudia M. Buch & Farid Toubal, 2003. "Economic Integration and FDI in Transition Economies : What Can We Learn from German Data?," Vierteljahrshefte zur Wirtschaftsforschung / Quarterly Journal of Economic Research, DIW Berlin, German Institute for Economic Research, vol. 72(4), pages 594-610. [Downloadable!] (restricted)
  19. Peter Nunnenkamp, 2002. "Determinants of FDI in Developing Countries: Has Globalization Changed the Rules of the Game?," Kiel Working Papers 1122, Kiel Institute for the World Economy. [Downloadable!]
  20. James R. Markusen & Keith E. Maskus, 1999. "Multinational Firms: Reconciling Theory and Evidence," NBER Working Papers 7163, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  21. Pol Antrà s, 2003. "Firms, Contracts, and Trade Structure," NBER Working Papers 9740, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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