Preferential trade areas, multinational enterprises, and welfare
The effects of preferential trade areas (PTAs) on the investments by multinational enterprises and their implications for the welfare of members and non-members are studied in a model with two types of firms: national firms and multinational firms. In the presence of multinational activity PTAs can create new investment as well as divert investment from non-members to members. Both affect the welfare of members positively. More interestingly, if the investment creation effect of a PTA is sufficiently strong, then the PTA could be welfare enhancing for non-members as well.
Volume (Year): 39 (2006)
Issue (Month): 2 (May)
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