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General-Equilibrium Approaches to the Multinational Firm: A Review of Theory and Evidence

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Author Info
James R. Markusen
Keith E. Maskus

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Abstract

Beginning in the early 1980s, theoretical analyses have incorporated the multinational firm into the microeconomic, general-equilibrium theory of international trade. Recent advances indicate how vertical and horizontal multinationals arise endogenously as determined by country characteristics, including relative size and relative endowment differences, and trade and investment costs. Results also characterize the relationship between foreign affiliate production and international trade in goods and services. In this paper, we survey some of this recent work, and note the testable predictions generated in the theory. In the second part of the paper, we examine empirical results that relate foreign affiliate production to country characteristics and trade/investment cost factors. We also review findings from analyses of the pattern of substitutability or complementarity between trade and foreign production.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 8334.

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Date of creation: Jun 2001
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Handle: RePEc:nbr:nberwo:8334

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Find related papers by JEL classification:
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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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.:
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Full references

Cited by:
(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. Ottaviano, Gianmarco I P & Turrini, Alessandro Antonio, 2003. "Distance and FDI When Contracts are Incomplete," CEPR Discussion Papers 4041, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  2. Bruno Merlevede & Koen Schoors, 2005. "How to Catch Foreign Fish? FDI and Privatization in EU Accession Countries," William Davidson Institute Working Papers Series wp785, William Davidson Institute at the University of Michigan Stephen M. Ross Business School. [Downloadable!]
    Other versions:
  3. Joshua Aizenman, 2002. "Volatility, employment and the patterns of FDI in emerging markets," NBER Working Papers 9397, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  4. Joshua Aizenman & Nancy Marion, 2001. "The Merits of Horizontal versus Vertical FDI in the Presence of Uncertainty," NBER Working Papers 8631, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  5. Frank A.G. den Butter & Raphie Hayat, . "Trade between China and the Netherlands: a Case Study of Globalization," Tinbergen Institute Discussion Papers 08-016/3, Tinbergen Institute. [Downloadable!]
  6. Eduardo Levy Yeyati & Christian Daude & Ernesto Stein, 2003. "Regional Integration and the Location of FDI," Business School Working Papers doce, Universidad Torcuato Di Tella. [Downloadable!]
  7. Tekin-Koru, Ayca & Waldkirch, Andreas, 2008. "North-South Integration and the Location of Foreign Direct Investment," MPRA Paper 6912, University Library of Munich, Germany. [Downloadable!]
  8. Olli-Pekka Oksanen, 2006. "Are Foreign Investments Replacing Domestic Investments? - Evidence from Finnish Manufacturing," Discussion Papers 1001, The Research Institute of the Finnish Economy. [Downloadable!]
  9. Amiti, Mary & Wakelin, Katharine, 2002. "Investment Liberalization and International Trade," CEPR Discussion Papers 3492, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  10. Andreas Waldkirch, 2004. "Vertical FDI? A Host Country Perspective," International Trade 0403008, EconWPA. [Downloadable!]
  11. Debaere & PEter, 2004. "Reversing the Perspective: Multinational Activity from Middle-Income Countries," Econometric Society 2004 North American Summer Meetings 140, Econometric Society. [Downloadable!]
  12. L. Cuyvers & M. Dumont & G. Rayp & K. Stevens, 2002. "Home Employment Effects of EU Firms' Activities in Central and Eastern European Countries," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 02/158, Ghent University, Faculty of Economics and Business Administration. [Downloadable!]
  13. T. Gao, 2003. "Multinational activity and country characteristics in OECD countries," Applied Economics Letters, Taylor and Francis Journals, vol. 10(4), pages 255-258, March. [Downloadable!] (restricted)
  14. Tekin-Koru, Ayca & Waldkirch, Andreas, 2007. "North American Integration and the Location of Foreign Direct Investment," MPRA Paper 5212, University Library of Munich, Germany. [Downloadable!]
  15. Eduardo Levy Yeyati & Ernesto Stein & Christian Daude, 2004. "The FTAA And The Location Of FDI," Working Papers Central Bank of Chile 281, Central Bank of Chile. [Downloadable!]
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  16. Kyoji Fukao & Yuhong Wei, 2008. "How do the Location Determinants of Vertical FDI and Horizontal FDI Differ?," Hi-Stat Discussion Paper Series d07-233, Institute of Economic Research, Hitotsubashi University. [Downloadable!]
  17. Roberto A. De Santis & Robert Anderton, 2004. "On the determinants of euro area FDI to the United States: the knowledge- capital- Tobin's Q framework," Working Paper Series 329, European Central Bank. [Downloadable!]
  18. Laura Alfaro & Andrew Charlton, 2007. "Intra-Industry Foreign Direct Investment," CEP Discussion Papers dp0825, Centre for Economic Performance, LSE. [Downloadable!]
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  19. Pol Antrà s, 2003. "Firms, Contracts, and Trade Structure," NBER Working Papers 9740, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  20. Debaere, Peter & Lee, Hongshik & Lee, Joonhyung, 2006. "Does Where You Go Matter? The Impact of Outward Foreign Direct Investment on Multinationals' Employment at Home," CEPR Discussion Papers 5737, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  21. Alfons Palangkaraya & Andreas Waldkirch, 2006. "Relative Factor Abundance and FDI Factor Intensity in Developed Countries," Melbourne Institute Working Paper Series wp2006n12, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne. [Downloadable!]
  22. Yu-Fu Chen & Michael Funke, 2004. "Option value, policy uncertainty, and the foreign direct investment decision," Money Macro and Finance (MMF) Research Group Conference 2003 14, Money Macro and Finance Research Group. [Downloadable!]
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