Recent theoretical developments have incorporated endogenous multinational firms into the general-equilibrium model of trade. One simple taxonomy separates the theory into vertical' models in which firms geographically separate activities by stages of production and horizontal' models of multi-plant firms which duplicate roughly the same activities in many countries. We refer to a hybrid of these two as the 'knowledge capital model'. In this paper, we nest these three models within an unrestricted model. Econometric tests give strong support to the horizontal model and overwhelming reject the vertical model.
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number
7164.
Length: Date of creation: Jun 1999 Date of revision: Publication status: published as Markusen, J. R. and K. E. Maskus. "Discriminating Among Alternative Theories Of The Multinational Enterprise," Review of International Economics, 2002, v10(4,Nov), 695-707. Topics in Empirical International Economics, Blomstrom, M. and L.Goldberg,eds., Chicago: University of Chicago Press, 2000, forthcoming. Handle: RePEc:nbr:nberwo:7164
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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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