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The theory of endowment, intra-industry and multi-national trade

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  • Markusen, James R.
  • Venables, Anthony J.

Abstract

We consider a trade model combining a 2x2x2 Heckscher-Ohlin structure, monopolistic competition, transport costs and multinational corporations. We demonstrate how the mix of national and multinational firms that operate in equilibrium depends on technology and on the division of the world endowment between countries. Multinationals are more likely to exist the more similar are countries in both relative and absolute endowments. Where multinationals exist they reduce the volume of trade and raise world welfare (although not necessarily that of both countries). They also reduce the agglomeration forces that arise when international factor mobility is allowed.
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Suggested Citation

  • Markusen, James R. & Venables, Anthony J., 2000. "The theory of endowment, intra-industry and multi-national trade," Journal of International Economics, Elsevier, vol. 52(2), pages 209-234, December.
  • Handle: RePEc:eee:inecon:v:52:y:2000:i:2:p:209-234
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    1. Brander, James & Krugman, Paul, 1983. "A 'reciprocal dumping' model of international trade," Journal of International Economics, Elsevier, vol. 15(3-4), pages 313-321, November.
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    5. Dixit, Avinash K & Stiglitz, Joseph E, 1977. "Monopolistic Competition and Optimum Product Diversity," American Economic Review, American Economic Association, vol. 67(3), pages 297-308, June.
    6. Markusen, James R. & Venables, Anthony J., 1998. "Multinational firms and the new trade theory," Journal of International Economics, Elsevier, vol. 46(2), pages 183-203, December.
    7. Markusen, James R., 1981. "Trade and the gains from trade with imperfect competition," Journal of International Economics, Elsevier, vol. 11(4), pages 531-551, November.
    8. Norman, Victor D & Venables, Anthony J, 1995. "International Trade, Factor Mobility and Trade Costs," Economic Journal, Royal Economic Society, vol. 105(433), pages 1488-1504, November.
    9. Krugman, Paul, 1991. "Increasing Returns and Economic Geography," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 483-499, June.
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    12. Venables, Anthony J., 1985. "Trade and trade policy with imperfect competition: The case of identical products and free entry," Journal of International Economics, Elsevier, vol. 19(1-2), pages 1-19, August.
    13. Helpman, Elhanan, 1984. "A Simple Theory of International Trade with Multinational Corporations," Journal of Political Economy, University of Chicago Press, vol. 92(3), pages 451-471, June.
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    JEL classification:

    • F1 - International Economics - - Trade
    • F2 - International Economics - - International Factor Movements and International Business

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