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Preferential trade areas, multinational enterprises, and welfare

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  • Priya Ranjan

Abstract

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.

Suggested Citation

  • Priya Ranjan, 2006. "Preferential trade areas, multinational enterprises, and welfare," Canadian Journal of Economics, Canadian Economics Association, vol. 39(2), pages 493-515, May.
  • Handle: RePEc:cje:issued:v:39:y:2006:i:2:p:493-515
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    Cited by:

    1. Shawn ARITA & TANAKA Kiyoyasu, 2013. "Regional Investment Liberalization and FDI," Discussion papers 13088, Research Institute of Economy, Trade and Industry (RIETI).
    2. Tanaka, Kiyoyasu & Arita, Shawn, 2016. "The impact of regional investment liberalization on foreign direct investment: A firm-level simulation assessment," Japan and the World Economy, Elsevier, vol. 37, pages 17-26.

    More about this item

    JEL classification:

    • F2 - International Economics - - International Factor Movements and International Business
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance

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